Question
Bond A B C D E Issuer Treasury Treasury Treasury Treasury Treasury Face Value 100 100 100 100 100 Coupon Rate 3.0% 3.0% 3.0% 3.0%
| Bond | A | B | C | D | E |
| Issuer | Treasury | Treasury | Treasury | Treasury | Treasury |
| Face Value | 100 | 100 | 100 | 100 | 100 |
| Coupon Rate | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% |
| Price | 100 | ||||
| Maturity | 1 | 2 | 3 | 4 | 5 |
The sequence of spot rates and forward rates are shown below,
| Time to Maturity | Spot (0Rn) | Forward (n-1Fn) |
| 1 | 3.0000% | 3.000% |
| 2 | 2.9000% | 2.800% |
| 3 | 2.700% | |
| 4 | 2.600% | |
| 5 | 2.500% |
1) An investor considers the purchase of 1-year annual zero-coupon Bond H to be issued 1 year from today with a face value of $100. The price of the Bond H is closet to:
97.266
97.276
98.266
98.276
2) An investor considers the purchase of 2-year annual zero-coupon Bond I to be issued 1 year from today with a face value of $100. The price of the Bond I is closet to:
94.719
95.719
96.719
97.719
3) An investor considers the purchase of 2-year annual zero-coupon Bond J to be issued 2 year from today with a face value of $100. The price of the Bond J is closet to:
92.903
93.903
94.903
95.903
4) An investor considers the purchase of 2-year annual 5%-coupon Bond K with a face value of $100, currently trading at a Z-spread of 50 bps. The price of the Bond K is closet to:
100.039
101.039
102.039
103.039
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Reinventing The CFO How Financial Managers Can Transform Their Roles And Add Greater Value
Authors: Jeremy Hope
1st Edition
1591399459, 978-1591399452
