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Consider a bond with an 8-year maturity, a 4% annual coupon, and annual payment frequency, which is redeemed at par. The price of the bond
Consider a bond with an 8-year maturity, a 4% annual coupon, and annual payment frequency, which is redeemed at par. The price of the bond is 89. Additionally, you have access to the bond's quotations if you wish to sell it after 3 years and after 6 years (considering only the last 5 years and 2 years to maturity, respectively). In particular, after 3 years, the quotation is 92 , while after 6 years, it is 96.3 . (a) Determine the piece-wise structure of interest rates by considering three distinct constant levels of interest between 0 and 3 years, 3 and 6 years, and from 6 to 8 years. (b) Calculate the accumulated value of a 200 EUR investment at t=0, taking into account the interest rate time structure derived at a)
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