Question
Suppose you buy a 1yr Treasury bill with a face value of $1,000 and a coupon rate of c = 5%. The 6 month zero
Suppose you buy a 1yr Treasury bill with a face value of $1,000 and a coupon rate of c = 5%. The 6 month zero rate is 4% per year. The 1 year zero rate is 4.4% per year.
a) How much money will this bond pay out in 6 months?
b) How much money will this bond pay out in 1 year?
c) How much would you pay today in order to receive $1 in 6 months given the prevailing zero rates?
d) How much would you pay today in order to receive $1 in 1 year given the prevailing zero rates?
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FINA 6201 Financial Theory And Policy Emery Trahan
Authors: Emery Trahan
1st Edition
1609270754
