Question
Suppose that the prices today of zero-coupon bonds with various maturities are in the following table. The face value of every bond is $1,000. Maturity
Suppose that the prices today of zero-coupon bonds with various maturities are in the following table. The face value of every bond is $1,000.
| Maturity in years | Price |
| 1 | 925.93 |
| 2 | 853.39 |
| 3 | 782.92 |
| 4 | 715.00 |
| 5 | 650.00 |
Calculate the one-year forward rate of interest for every year.
Suppose that today you buy one 3-year maturity zero coupon bond. How many 5-year maturity zeros would you have to sell to make
What are the cash flows from the strategy in part (b) in each year?
What is the effective 2-year interest rate on the effective 3-year ahead forward loan?
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Millionaire By Thirty The Quickest Path To Early Financial Independence
Authors: Douglas R. Andrew, Emron Andrew, Aaron Andrew
1st Edition
0446501840, 978-0446501842
