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Consider the continuously compounded yield curve y(t,T)=0.045-0.04e^(-0.5)(T-t) (a) Determine the purchase price of a zero coupon bond that matures after 4 years if its face
Consider the continuously compounded yield curve y(t,T)=0.045-0.04e^(-0.5)(T-t)
(a) Determine the purchase price of a zero coupon bond that matures after 4 years if its face value is $100.
(b) Consider the cash flows (payments) [ C1, C2, C3] = [ $350, $450, $400] at times [ T1, T2, T3] = [ 1.75, 2.25, 3.75] (in years).
(i) Determine the present value of the cash flow stream.
(ii) Determine the duration of the cash flow stream to 3 decimals
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