Question
1. Yield Curve A 5year bond has a face value of 100 and annual coupon payments that are 6% of face value. The yieldtomaturity on
1. Yield Curve A 5year bond has a face value of 100 and annual coupon payments that are 6% of face value. The yieldtomaturity on this bond is 5.5%. a. What is the price of this bond? The price of this bond is: ____________________. Show your work: b. The oneyear interest rate is 4%, the twoyear interest rate is 4.5% and the threeyear interest rate is 5%. The price of a split face zero coupon bond which pays $50 in year 4 and $50 in year 5 equals 78.49535. What are the 4year and the 5year interest rates? The 4year interest rate is: ____________________. The 5year interest rate is: ____________________. Show your work: please explain as much as possible
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