Question
This is a problem that has TWO questions. Therefore, please choose TWO answers (one choice for each question) to get full credit for this questions,
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This is a problem that has TWO questions. Therefore, please choose TWO answers (one choice for each question) to get full credit for this questions, otherwise you will only get partial points.
Assume 6-month zero rate is 4.045%. Also use the following table to answer the questions below.
The following table gives the prices of bonds:
Face value
Time to maturity
Coupon / year
bond price
100
1 year
0
97
100
1.5 year
15
98.5
*Half of the stated coupon is paid every six months
** all rates are continuously compounded
#1. What is the zero rate for 1 year?
#2. What is the zero rate for 1.5 year?
#1) 3.046%
#1) 4.545%
#1) 3.455%
#1) 5.206%
#2) 12.245%
#2) 13.522%
#2) 16.544%
#2) 15.377%
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