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Please answer both a) and b) Show full explanations for both. 2. The Government of Ontario has an outstanding bond that matures in exactly 3
Please answer both a) and b)
Show full explanations for both.
2. The Government of Ontario has an outstanding bond that matures in exactly 3 years and pays a semi-annual coupon of 4% on a face value of $1,000. The current market price of the bond is $945.83. (a) Using an initial gucss of 9% compounded semi-annually, use one iteration of Newton's method to approximate the bond's yield. Please express your answer as an annual rate with semi-annual compounding. You may use the fact that P(.045)=871.05 and P(.045)=4,741.82 for this bond. (b) What happens to the interval (4%,9%) after one iteration of the bisection method? You may use the fact that P(.0325)=932.84 for this bondStep by Step Solution
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