Consider the following three bonds:
| Bond | Coupon Rate | Maturity (years) | Price |
| A | 0% | 1.0 | $947.5572 |
| B | 7% | 1.0 | $1,014.8980 |
| C | 5% | 1.5 | $981.4915 |
Assume that coupons are paid every 6 months and the face values ofall the bonds are $1,000.
(a) Determine the spot rate curve. (That is, determines0.5, s1, ands1.5 in yearly terms.) (Keep 4 decimal places,e.g. 0.1234)
s0.5: s1: s1.5 :
(b) Suppose that the 0.5- and 1.5-year zero-coupon bonds areavailable. Determine their respective prices. (Keep 2 decimalplaces, e.g. xxx.12)
PZ0.5: PZ1.5:
(c) Determine the forward rate f 0.5,1 (inyearly term) on a 6-month Treasury bill 6 months from now. (Keep 4decimal places, e.g. 0.1234)
(d) Determine the forward rate f0.5,1.5 (inyearly term) on a 12-month Treasury bill 6 months from now. (Keep 4decimal places, e.g. 0.1234)
(e) Price the 1.5-year coupon bond 6 months from now. (Keep 2decimal places, e.g. xxx.12)?
