Assume that the 1-year zero-coupon bond is sold at $88.97 and the yields to maturity for...

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Finance

Assume that the 1-year zero-coupon bond is sold at $88.97 andthe yields to maturity for the coupon bonds selling at marketprices equal to their face values are 12% and 14% for 1-year and1.5-year issues respectively. Coupons are paid every 6 months andface values are $100 for all the bonds.
(a) Calculate the spot rate curve (s_0.5,s₁, s_1.5).
(Keep your answer in decimal format 4 decimal places, e.g.0.1234. Do not give in percent format e.g. 12.34%.)
Â Â Â Â s_0.5:Â Â Â Â s₁:Â Â Â Â Â s_1.5 :
(b) Compute the quasi-modified duration for each of these bonds.(Keep 2 decimal places, e.g. xx.12.)
Â Â Â Â Zero-coupon bond:
Â Â Â 12% coupon bond:Â Â
Â Â Â 14% coupon bond:Â Â
(c)Â Â Determine the current price of an 10% coupon bondwith face value $100 and 18 months to maturity. (Keep 2 decimalplaces, e.g. xx.12.)

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4.2 Ratings (689 Votes)

Part aLet S05 S1 S15 be the spotrates Then1year zerocoupon bond is sold at 8897Hence 8897 100 1 S1 22Hence S1 100889712 1 x 2 01204The yields to maturity for the coupon bonds selling at marketprices equal to their See Answer

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