15. Consider the following four bonds: F n c P0 1000 1 0.01 1005 1000 2 0.05...
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15. Consider the following four bonds:
F n c P0 1000 1 0.01 1005 1000 2 0.05 1040 1000 3 0.04 1020 1000 4 0.04 990 Based on the cash flows and prices associated with these bonds, determine the following:
a. Spot rates y0,n for each of four years 1 through 4. These are interest rates on loans originating at time 0.
b. Forward rates y1,t for each of three periods beginning with year 1. These are interest rates on loans originating at time 1.
c. Forward rates y2,t for each of two periods beginning with year 2. These are interest rates on loans originating at time 2.
d. Forward rates y3,n for the period beginning with year 3. This is the interest rates on loans originating at time 3.
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