Given the following spot rates and assuming the bonds and thetime periods are semi-annual:
Time Spot Rate 1 3.00% 2 3.30% 3 3.50% 4 3.90% 5 4.40% 6 4.75% 74.95% 8 5.05% 9 5.15% 10 5.25% 11 5.40% 12 5.50% 13 5.60% 14 5.65%15 5.75% 16 5.80%
1.What is the price of a 4% coupon bond maturing in 5 years?
2. What is the YTM on the above bond?
3. What is the implied forward rate on a two-year bond issue in18 months?
4. What is the implied forward rate on a 1-year bond issued in 5years?
5. Suppose a 3-year, 0-coupon bond for delivery in 2 yearstraded in the futures market. What should its price be?
