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Use the following information for question 3. The 1-year, 2-year, 3-year and 4-year zero rates are 6%, 7%, 8% and 8.5% per annum with semi-annual
Use the following information for question 3. The 1-year, 2-year, 3-year and 4-year zero rates are 6%, 7%, 8% and 8.5% per annum with semi-annual compounding.
- What are the zero coupon bond prices with maturities of 1 year, 2 years, 3 years and 4 years? (Assume that you receive a face value of $100 for each of these bonds on their maturity dates).
- What are the corresponding per annum zero rates with continuous compounding?
- What is the forward rate for an investment initiated two years from today and maturing 4 years from today? (Give your answer per annum with continuous compounding)?
- What is the forward rate for an investment initiated one year from today and maturing 2 years from today? (Give your answer per annum with continuous compounding)?
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Venture capital and the finance of innovation
Authors: Andrew Metrick
2nd Edition
9781118137888, 470454709, 1118137884, 978-0470454701
