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Questions Question 1. The following forward rates expressed as per annum convertible half yearly rates are observed in the market. Start time End Time Rate

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Questions Question 1. The following forward rates expressed as per annum convertible half yearly rates are observed in the market. Start time End Time Rate 0.5 2.5% 0.5 1.0 2.8% 1.5 3.1% 3.2% 2.0 A bond with $1 million principal and maturity 1.5 years is to be issued immediately. It will pay a coupon six monthly. Find the coupon rate that will make the bond be at par. Express the answer as a per annum convertible half yearly rate correct to one basis point. What is the value of the bond at issue? 3 marks

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