Suppose that 6-month, 12-month, 18-month, and 24-month zero rates are 3.8%, 4%, 4.3%, and 4.6% per annum with continuous compounding respectively. Estimate the cash price of a bond with a face value of 100 that will mature in 24 months and pays a coupon of 10% per annum semiannually.
The cash flows from this bond are $10, $10, $10, and $110(100+10) at 6-month, 12-month, 18-month, and 24-month respectively.
Considering the zero rates are 3.8%, 4%, 4.3%, and 4.6% per annum, the value of the bond will be calculated as follows:
Bond value = Σ CF/(1+r/n)^n
= $10/(1+3.8%/2)^1+$10/(1+4%/2)^2+$10/(1+4.3%/2)^3+$110/(1+4.6%/2)^4
= $129.24
Suppose that 6-month, 12-month, 18-month, and 24-month zero rates are 3.8%, 4%, 4.3%, and 4.6% per...
Suppose that 6-month, 12-month, 18-month, and 24-month zero rates are 3.8%, 4%, 4.3%, and 4.6% per annum with continuous compounding respectively. Estimate the cash price of a bond with a face value of 100 that will mature in 24 months and pays a coupon of 10% per annum semiannually. approx. $112.37 approx. $104.56 approx. $110.17 approx. $99.85
Suppose that 6-month, 12-month, 18-month, and 24-month zero rates continuously compounded are 0.02, 0.03,0.04,and 0.01 per annum, respectively. Estimate the cash price of a bond with a face value of $1000 that will mature in 24 months pays a coupon of $84 per annum semiannually. Please write down the numerical answer with two decimal points and no dollar sign.
6. Calculated Numeric: Using Zero Rate table A Estima... Points: 15 Question Using Zero Rate table A Estimate the cash price of a bond with a face value of $100 that will mature in 24 months and pays a coupon of 4 semiannually per annum Answer Answer range .. Table A - Zero Rates Suppose that zero interest rates with continuous compounding are as follo Maturity (months) Rate(% per annum) 4.0 4.2 4.4 4.5 4.6 4.7 5.0 24
Exercise 2. The 6-month, 12-month. I 8-month, and 24-month zero rates are 4%, 4.5%, 4.75% and 5%, with continuous compounding (a) What are the rates with semi-annual compounding? (c) Forward rates are rates of interest implied by current zero rates for periods of time in the future. Calculate the forward rate for year 2, i.e. the rate for the period of time between the end of 12-month and the end of 24-month. (d) Consider a 2-year bond providing semiannual coupon...
6. (20 points) Suppose months, maturity in 12 months, and maturity in 18 months. Suppose the 6 month bond is a zero-coupon bond and has a theoretical price of $101. Suppose the 1 year bond pays a coupon every 6 months at an annual rate of $6, and has a theoretical price of $97. Suppose the 18 month bond pays a coupon every 6 months, at an annual rate of $8 and has a theoretical price of $96. The face...
The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual compounding, respectively. (a) What are the rates with continuous compounding? (b) What is the forward rate for the six-month period beginning in 18 months? (c) What is the value of an FRA that promises to pay you 6% (with semiannual payment) on a principal of $1 million for the six-month period starting in 18 months? (d) If the six-month LIBOR rate were 6.5% in...
The 18-month, and 24-month risk-free zero rates are 4.75%, and 5% with semiannual compounding. What is the value of an FRA where the holder pays LIBOR and receives 7% (semiannually compounded) for a six-month period beginning in 18 months? The principak is $10 million
i need simple explain please 7) The zero rates for three, six, nine and twelve compounding. These rates suggest that the forwa continuous compounding. What is the present va annum rate with quarterly compounding) for $1,000,000? e, Six, nine and twelve months are 8%, 8.2%, 8.4% and 8.5% with continuous Best that the forward rate between nine months and twelve months is 8.8% with Is the present value of an FRA that enables the holder to earn 9.4% (per very...
the 6-month and 1-year zero rates are 3% and 4% The 6-month and 1-year zero rates are 3% and 4% per annum with semi-annual compounding. Which of the following is the par yield for a bond that provides semi-annual coupons with a maturity of one year and a par value of 1007 *Do not convert to a continuous compounding version of par yield 04.03% 3.99% 3.89% 3.95%
Six-month LIBOR is 3.5%. LIBOR forward rates for the 6- to 12-month period and for the 12- to 18-month period are both 3.7%. Swap rates for 2- and 3-year semiannual pay swaps are 3.6% and 3.8%, respectively. Estimate the LIBOR forward rates for maturities of 18-month to 2 years, 2 to 2.5 years, and 2.5 to 3 years. Assume that the 2.5-year swap rate is the average of the 2- and 3-year swap rates and that OIS zero rates for...