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) Consider the following information on zero-coupon bonds with semiannual compounding in yields : Time to Maturity Spot rate (%) 6 months 15 12 months
- ) Consider the following information on zero-coupon bonds with semiannual compounding in yields:
Time to Maturity | Spot rate (%) |
6 months | 15 |
12 months | 14.5 |
18 months | 13.5 |
24 months | 12 |
30 months | 10 |
36 months | 7.5 |
42 months | 4.5 |
- (6 points) Draw a yield curve and justify the shape of the yield curve in compliance with the expectations hypothesis.
- (6 points) Find the semiannual forward rate for the period from 18 to 24 months.
- (6 points) Find the one-year forward rate (semiannually compounded) for the period from 18 to 30 months.
- (6 points) Find the two-year forward rate (semiannually compounded) for the period from 18 to 42 months.
- (6 points) Find the price of a 3-year semiannual-paying Treasury bond with a coupon rate of 10%.
- (10 points) Find the expected holding period return on the semiannual coupon-bond with 10% coupon rate over the next three years if you buy the bond today? Assume that the coupon bond matures in 42 months.
- (20 points) The following are the average yields on U.S. Treasury bonds at two different points in time:
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