Question

NEED ANSWER IN 5 MINUTES . PLEASE IT'S DUE

PROBLEM 1 USE ANY METHOD A/ The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years YTM 4.97% 5.54% 5.77 % What is the risk-free interest rate for a five-year maturity? The risk-free interest rate for a five-year maturity is 5.94% 6.08% %. (Round to two decimal places.) Suppose a ten-year, $ 1 000 bond with an 8.5% coupon rate and semiannual coupons is trading for $ 1034.77 a. What is the band's yield to maturity (expressed as an APR with semiannual compounding)? (Roundto two decimal places. b. If the bonds yield to maturity changes to 9.1% APR, what will be the bond's price?

Answer 1

Risk-free rate for 5 year maturity = ((1+Year1 Rate)*(1+Year2 Rate)*(1+Year3 Rate)*(1+Year4 Rate)*(1+Year5 Rate))^(1/Total years) - 1

Risk-free rate for 5-year maturity = ((1+4.97%)*(1+5.54%)*(1+5.77%)*(1+5.94%)*(1+6.08%))^(1/5) - 1
= 1.05659 - 1
= 0.05659
= 5.66%

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