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7. Use the information in the table below about the value of various bonds to find the cash price of a US Treasury bond that
7. Use the information in the table below about the value of various bonds to find the cash price of a US Treasury bond that has a 5% coupon and eight months remaining in its life. Assume that the bonds in the table below make coupon payments semiannually. Bond price (per Coupon Maturity (months) 1 2 3 $100) 99 98 97 96 95 94 93 92 9% 8% 7% 6% 5% 4% 4 5 6 7 8 3% 2% 1% 9 91 3. Two months ago, a trader named Joe entered into a Forward Rate Agreement in which he agreed to pay 5% based on quarterly compounding. The FRA has a notional principle of $100 million and the agreement at the time it was entered into stated that it was for a three-month period starting in six months. a. Using the information below, please find the current value of the FRA from Joe's perspective. b. Explain why the value of the FRA changed after it was initiated? 6 Term Spot Zero Rate % (months) (based on continuous compounding) 1 2 2 4 3 4 8 5 10 6 7 6 5 8 8 9 4
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