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Assume spot rates right now are as follows. 6-months 0.75% 18-months 1.25% 12-months 1.00% 24-months 1.50% A newly issued 2-year bond pays a coupon rate
Assume spot rates right now are as follows.
6-months 0.75% 18-months 1.25%
12-months 1.00% 24-months 1.50%
A newly issued 2-year bond pays a coupon rate of 1.5% (assume semiannual payments - use the convention (1+r/2)t where r is the simple annual interest rate and t refers to the number of semiannual periods) and has a par value of $1,000.
Suppose there is a futures contract available on this bond that calls for delivery of the bond immediately after it makes its first coupon payment. What is the no-arbitrage futures price today?
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