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...

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Finance

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) Suppose that the 0.5- and 1.5-year zero-coupon bonds areavailable. Determine their respective prices. (Keep 2 decimalplaces, e.g. xxx.12)
P_Z0.5: P_Z1.5:
(b) 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)
(c) Determine the forward rate f_0.5,1.5 (inyearly term) on a 12-month Treasury bill 6 months from now. (Keep 4decimal places, e.g. 0.1234)
(d) Price the 1.5-year coupon bond 6 months from now. (Keep 2decimal places, e.g. xxx.12)?

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4.0 Ratings (555 Votes)

Answer 1 The price of a zero coupon Bond will calculated by discounting of maturity value of bond by effective interest rate ie P M 1rn First we have to See Answer

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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