Question
A Treasury coupon bond that pays interest semi-annually has a par value of $1,000, a maturity of 2 years, and a coupon rate of 5.2%.
A Treasury coupon bond that pays interest semi-annually has a par value of $1,000, a maturity of 2 years, and a coupon rate of 5.2%. Use the following spot rates to compute the arbitrage-free value of this coupon bond.
| Year | Period | Spot Rate | Cash Flow | Discount Factor | PV of Cash Flow |
| t/2 | t | Zt | CFt | dt=(1+Zt/2)-t | CFt*dt |
| 0.5 |
| 3.05% |
|
|
|
| 1.0 |
| 3.38% |
|
|
|
| 1.5 |
| 3.90% |
|
|
|
| 2.0 |
| 4.17% |
|
|
|
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Algorithmic Finance A Companion To Data Science
Authors: Christopher Hian-ann Ting
1st Edition
9811238308, 978-9811238307
