Question
Please help need for review for test Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face
Please help need for review for test
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000.
Maturity (Years) | Price | ||
1 | $ | 968.16 | |
2 | 878.39 | ||
3 | 812.92 | ||
4 | 749.00 | ||
5 | 675.46 | ||
a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.)
Maturity (years) Forward Rate
2 ---------%
3 --------%
4 -----------%
5 ----------------%
b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 2 decimal places.)
Face value -------------
Rate of synthetic loan --------%
c. How could you construct a 1-year forward loan beginning in year 4? (Round your Rate of synthetic loan answer to 2 decimal places.)
Face value -------------
Rate of synthetic loan --------%
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