Question
The bond equivalent yield (BEY) of a US zero-coupon bond with time to maturity of 5 months is 2%. A US bond with a coupon
The bond equivalent yield (BEY) of a US zero-coupon bond with time to maturity of 5 months is 2%. A US bond with a coupon rate of 6% and time to maturity of 11 months from now has a clean price equal to 930. Assume that every month is made of 30 days.
a. Plot the first two points of the term structure of interest rates following the convention of the Wall Street Journal (i.e. plot the points only for the maturities of 5 months and 11 months). Please show clearly all the steps that you decide to implement.
b. Compute the semiannual forward rate between the maturity of 5 months and that of 11 months.
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