You are a bond trader and see on your screen the following information on three bonds with annual coupon payments and face value $1000:

Bond	Coupon Rate (%)	Maturity (Years)	Yield-to-Maturity
A	0	1	4.00%
B	5	2	4.50%
C	6	3	5.00%

Using the above bonds, you want to create a replicating portfolio that reproduces the cash flows from a 3-year zero coupon bond with face value $1,000.

How many units of bond C do you hold in this portfolio? Note: each "unit" of a bond has $1,000 face value and it is possible to hold fractional units of bonds.

Hint: these questions are asked in the order C, B, A for a reason.

[Please enter your answer using at least 3 digits of precision. Enter a positive number for a long position and a negative number for a short position, so that going short one unit of a bond should be entered as -1.00.]

Your Answer:

Using the above bonds, you want to create a replicating portfolio that reproduces the cash flows from a 3-year zero coupon bond with face value $1,000.

How many units of bond B do you hold in this portfolio? Note: each "unit" of a bond has $1,000 face value and it is possible to hold fractional units of bonds.

Hint: these questions are asked in the order C, B, A for a reason.

[Please enter your answer using at least 3 digits of precision. Enter a positive number for a long position and a negative number for a short position, so that going short one unit of a bond should be entered as -1.00.]

Your Answer:

Using the above bonds, you want to create a replicating portfolio that reproduces the cash flows from a 3-year zero coupon bond with face value $1,000.

How many units of bond A do you hold in this portfolio? Note: each "unit" of a bond has $1,000 face value and it is possible to hold fractional units of bonds.

Hint: these questions are asked in the order C, B, A for a reason.

[Please enter your answer using at least 3 digits of precision. Enter a positive number for a long position and a negative number for a short position, so that going short one unit of a bond should be entered as -1.00.]

Your Answer:

Using your above answers, compute the price of a 3-year zero-coupon bond with face value $1,000 that is consistent with no arbitrage.

[Please enter your answer in dollars, without the $ sign, using at least 2 digits of precision.]

Your Answer: