1. You have a 4-year coupon bond that pays semiannual interest. The coupon rate is 8% and the par value is 100.

a. Can you construct a synthetic equivalent of this bond? Be explicit and show your cash flows.

b. Price this coupon bond assuming the following term structure (represented by bid/ask prices at annual frequency) and by using a linear interpolation to discount semi-annual cashflows:

B1 5 0:90=0:91; B2 5 0:87=0:88; B3 5 0:82=0:83; B4 5 0:80=0:81

c. What is the 1 3 2 FRA rate?