6 Betty and Bob must construct the ZCB yield curve for Freedonia. Freedonia has bonds of 6 months, 12 months, 18 months, and 24 months terms. A 6 month ZCB with maturity value of $100 is priced at $94.3396. A 1 year coupon bond with maturity value of $100 and a coupon rate of 8% per annum payable semiannually is priced at $94.6112. An 18 month coupon bond with maturity value of $100 and a coupon rate of 19% per annum payable semiannually is priced at $105.44031. A 2 year coupon bond with maturity value of $100 and a coupon rate of 10% per annum payable semiannually is priced at $90.2871.

a By viewing the coupon bond as the sum of the ZCBs find the per annum yield compounded semiannually for the 6 months, 1 year, 18 months and 2 years Zero Coupon Bond. Graph this yield versus term.

b A special 2 year bond has maturity value of $100 and coupons of $4, $9, $5, and $7 in that order. Use the Z.C.B. yield curve data to compute the price of the bond.

c Find and write the equation of the price of the special bond in terms of the coupons, maturity value and semiannual yield to maturity, i. Use Excel Solver