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Consider the following data on traded coupon bond issues and fill the gaps assuming an arbitrage-free market. The face value of each bond is
Consider the following data on traded coupon bond issues and fill the gaps assuming an arbitrage-free market. The face value of each bond is 100. Time to maturity Price Annual coupon YTM Spot rate Forward rate 1 103.01 5.5 2.42% 2 102.42 5.5 4.26% 3 101.03 5.5 5.12% 5.21% 4 99.97 5.5 Hint: Some of the YTMs might need to be solved numerically, for example using Excel.
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To fill in the gaps and calculate the missing spot rates and forward rates we can use the provided data and apply the concept of arbitragefree market ...
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Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
9th Edition
73530700, 978-0073530703
