Problem B.

The current price of a 6-month zero coupon bond with a face

value of $100 is B1. If a 9-month strip with a face value of $100 is currently

trading for B2, find the forward interest rate for the 6 to 9 month period.

Solve by both continuous compounding and quarterly compounding. Write

your answers for the following:

10. Six-month spot interest rate for quarterly compounding.

11. Nine-month spot interest rate for quarterly compounding.

12. Forward rate (6 to 9 months) for quarterly compounding.

13. Six-month spot interest rate for continuous compounding.

14. Nine-month spot interest rate for continuous compounding.

15. Forward rate (6 to 9 months) for continuous compounding.

16. What is the guaranteed fair price of a 3-month T-Bill to be delivered

at 6 months from now, assuming quarterly compounding?

17.What is the guaranteed fair price of a 3-month T-Bill to be delivered

at 6 months from now, assume continuous compounding?

uin A1 669116578 A2 9.6 A3 7.6 A4 11.6 A5 103.6 A6 96.2 A7 100.9 B1 106.32 B2 96.84 C1 95.84 C2 3.6 C3 101.16 C4 9.6 D1 107.2 D2 11.6 D3 14.6 D4 9.6 D5 103 D6 107 107