A) Consider five bonds with the following features at date t=0: ...
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Finance
A) Consider five bonds with the following features at date t=0:
Annual Coupon
Maturity
Price
Bond 1
6
1 year
103
Bond 2
5
2 years
102
Bond 3
4
3 years
100
Bond 4
6
4 years
104
Using the bootstrapping method, compute the yearly spot curve by calculating the spot rates for all four maturities (use continuous compounding).
B) Calculate all possible forwards rates starting two years from now using the appropriate spot rates from (A) (using the continuous compounding formula).
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