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5. A coupon bond is being issued today. The face value of this bond is $10,000, it makes 2 coupon payments per year, and
5. A coupon bond is being issued today. The face value of this bond is $10,000, it makes 2 coupon payments per year, and it has maturity T = 5 years. The forward price to purchase this bond at t = 2 years, just after the coupon payment at that time, is F0,2 = $9,708.95. A zero coupon bond with face value $1,000 and maturity T = 5 years can be bought or sold today for $862.61. A zero coupon bond with face value $1,000 and maturity T = 2 years can be bought or sold today for $953.67. Today, the nominal annual yield to maturity of a 2-year annuity making 2 payments per year is r[2] = 2.299%. The yield to maturity of a 5-year annuity making 2 payments per year is r5 [2] = 2.691%. (5) What is the nominal annual coupon rate q[2] of the coupon bond?
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To find the nominal annual coupon rate q2 of the coupon bond we can use the relationship between the ...Get Instant Access to Expert-Tailored Solutions
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