a)

Information on Coupon Bonds				Information on Zero Rates
Maturity (years)	Coupon Rate	Coupon Payment		Time (years)	Zero Rate
0.5	2.30%	Semi-annual		0.5	1.50%
1	5.00%	Semi-annual		1	1.85%
1.5	7.83%	Semi-annual		1.5	2.00%
2	6.30%	Semi-annual		2	2.30%
2.5	5.25%	Semi-annual		2.5	2.91%
3	8.23%	Semi-annual		3	3.00%

b)

Information on Yield to Maturity for Coupon Bonds
Maturity (years)	Coupon Rate	Coupon Payment	YTM
0.5	2.30%	Semi-annual	1.5%
1	5.00%	Semi-annual	2.3%
1.5	7.83%	Semi-annual	2.5%
2	6.30%	Semi-annual	3.3%
2.5	5.25%	Semi-annual	3.9%
3	8.23%	Semi-annual	4.3%

1) Given the term structure for zero rates (continuously compounded) in the spreadsheet labeled (a), compute the arbitrage-free price of the given semi-annual coupon bonds. Recall that a semi-annual coupon bond with maturity T pays c/2 at times t = 0.5 ~ j for j = 1, 2, ..., 2T and a principal, normalized to 1 at time T.

2) Given the yields to maturity of the following semi-annual coupon bonds (where each bond is characterized by its maturity T and annual coupon rate c described as above), compute the implied arbitrage-free term structure of rates expressed with continuously compounding. The data for this question is in the spreadsheet labeled as (b).

3)Compute the duration and convexity of the coupon bonds whose prices, and the corresponding zero rates, are given by question (and answer) (b) above.