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  3. (b) the forward rate from time =1 to time ,1,, has

(b) The forward rate from time =1 to time ,1,, has the following values: ...

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Accounting

(b) The forward rate from time =1 to time ,1,, has the following values:
0,1=5.0%,1,2=5.5%,2,3=3.8%.
(i) Assuming no arbitrage, calculate:
(c) the price per K100 nominal of a 3-year bond paying an annual coupon in arrears of 4%, redeemed at par in exactly three years, and
(d) the gross redemption yield from the bond [7]
(ii) Explain why a bond with a higher coupon would have a lower gross redemption yield, for the same term to redemption.

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