Pl. 1. Consider the information in the following table Bond principal ($) Time to maturity (years) Annual coupon ($) Bond price ($) 100 0.25 0 99.6675 100 0.50 0 99.0025 PI.1.1. Compute the Treasury zero-rates and the forward interest rate(s) (p.a.) (round to 6 decimals). Write them also as a percentage P1.1.2. Letrbe equal to the value of the forward interest rates for the second quarter (calculated in Pl.1.1.-decimal). Suppose that you enter into a 8-month forward contract on a non-dividend paying stock when the stock price is $821 and the risk-free interest rate isr%per annum with continuous compounding Determine the forward price for the no arbitrage opportunity case. Describe the arbitrage strategy when the forward price is 500. Use r=5% p.a. ifr was not determined in PI 1.1 P1.1.3. Consider a 6-month bond with a principal (par value or face value) of $1000 provides coupons at the rate of 8% pa. quarterly Determine the theoretical price of the bond by employing the Treasury zero-rates with continuous compoundng from application Pl.11 One should employ 5%p.a. instead of the P1.1.1. Treasuryzero-rates if P1.1.1. was not solved (but still with continuous compounding). Pl. 1. Consider the information in the following table Bond principal ($) Time to maturity (years) Annual coupon ($) Bond price ($) 100 0.25 0 99.6675 100 0.50 0 99.0025 PI.1.1. Compute the Treasury zero-rates and the forward interest rate(s) (p.a.) (round to 6 decimals). Write them also as a percentage P1.1.2. Letrbe equal to the value of the forward interest rates for the second quarter (calculated in Pl.1.1.-decimal). Suppose that you enter into a 8-month forward contract on a non-dividend paying stock when the stock price is $821 and the risk-free interest rate isr%per annum with continuous compounding Determine the forward price for the no arbitrage opportunity case. Describe the arbitrage strategy when the forward price is 500. Use r=5% p.a. ifr was not determined in PI 1.1 P1.1.3. Consider a 6-month bond with a principal (par value or face value) of $1000 provides coupons at the rate of 8% pa. quarterly Determine the theoretical price of the bond by employing the Treasury zero-rates with continuous compoundng from application Pl.11 One should employ 5%p.a. instead of the P1.1.1. Treasuryzero-rates if P1.1.1. was not solved (but still with continuous compounding)