Question
The current prices of three U.S. treasury bonds are as follows: Maturity Coupon Rate Price 1 0% $97.474 2 4% 99.639 3 5% 101.418 Assume
The current prices of three U.S. treasury bonds are as follows:
Maturity Coupon Rate Price
1 0% $97.474
2 4% 99.639
3 5% 101.418
Assume that coupons paid yearly and all bonds have a PAR value of $100.
a. What are the 1-, 2- and 3-year spot rates?
b. What are the year 1 to 2 and year 1 to 3 forward rates?
c. What is the price of a three-year bond with a 8% annual coupon.
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Financial and Management Accounting
Authors: Pauline Weetman
7th edition
1292086599, 978-1292086590
