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There are four zero-coupon Treasury bonds as follows: Maturity (years) Price ($) 0.5 979.43 1.0 955.54...

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Finance

There are four zero-coupon Treasury bonds as follows: Maturity(years) Price ($) 0.5 979.43 1.0 955.54 1.5 928.60 2.0 897.17Assume that the face values are $1000 for all the bonds. (a)Determine the quasi-modified duration for the given 1.0-yearzero-coupon bond. (Keep 2 decimal places, e.g. xx.12) (b) The pricefor a 2-year Treasury note with semi-annual coupon payments is $987.42. Find the annual coupon rate for the note, and hencedetermine its quasi-modified duration. Coupon rate: % (Keep it inpercentage format with 2 decimal places, e.g. xx.12%) Qusi-modifiedduration: (Keep 2 decimal places, e.g. xx.12)

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3.8 Ratings (655 Votes)
If Si is the spot rate for the period i then price ofthe zero coupon bond ZCB with maturity period i will bePi FV 1 Si 2iHence spot rate Si FV Pi1i 1 x 2 1000 Pi1i 1 x    See Answer
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