Question
4. The following table provides prices of 4 government bonds with different time to maturity, with a coupon of 8% and a par value of
4. The following table provides prices of 4 government bonds with different time to maturity, with a coupon of 8% and a par value of $100.
-
(6 points) Calculate the yield curve for years 1-4? Is the curve going up or down?
-
(6 points) What is the current expectation to the interest rate for two years starting in 2 years ( )?
-
(6 points) In two year from now you want to take on a loan of $500, which you plan to pay back at year t=4. How can you guarantee the interest rate on this loan based on today's prices, if there is not market for forward interest contracts? show complete numerical solution
-
(7 points) The duration of a (different) fixed coupon bond with a maturity of 4 years is 3.50465. What is the bond's coupon rate? If interest rates rise by 2%, by how much will the price of the bond go up or down?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started