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Please show all the steps: Question 1. Suppose there are five bonds traded in the market with maturities T=1,2,3,4,10 years. All bonds pay 3% p.a.

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Question 1. Suppose there are five bonds traded in the market with maturities T=1,2,3,4,10 years. All bonds pay 3% p.a. semiannual coupons on a face value of $100, that is, each semiannual coupon is $1.5. At time 0 the bond prices are given by the following table. (a) Show that the value of the yield curve is 0.019753 at times t=0.5,1, then find all the other values of the yield curve at times t{1.5,2,2.5,,10}. [4 marks] (b) Find the price and yield-to-maturity of a 1-year bond with 5% p.a. semiannual coupons and a face value of $100. [2 marks] Question 1. Suppose there are five bonds traded in the market with maturities T=1,2,3,4,10 years. All bonds pay 3% p.a. semiannual coupons on a face value of $100, that is, each semiannual coupon is $1.5. At time 0 the bond prices are given by the following table. (a) Show that the value of the yield curve is 0.019753 at times t=0.5,1, then find all the other values of the yield curve at times t{1.5,2,2.5,,10}. [4 marks] (b) Find the price and yield-to-maturity of a 1-year bond with 5% p.a. semiannual coupons and a face value of $100. [2 marks]

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