| Bond | Period | Year | Coupon | Price | YTM | Spot | Forward |
| A | 1 | 0.5 | 4.8 | 101.78 | 1.22% | 1.22% | 1.22% |
| B | 2 | 1 | 5.4 | 102.25 | 3.10% | 3.12% | 5.05% |
| C | 3 | 1.5 | 6.2 | 101.34 | 5.26% | 5.35% | 9.87% |
| D | 4 | 2 | 8.1 | 106.4 | 4.71% | 4.76% | 3.01% |
The table above reports the prices and coupons of four bonds, as well as some implied rates. The coupons are paid semiannually. The rates in the table are APR (Answers should also be APR.) Forward rates for a period start a period before and continue for this period only: for example, the missing forward rate in the second row is the forward rate between 6 months from now and 12 months from now, the 9.87% forward rate in the third row is the forward rate between 12 months from now and 18 months from now
Q1- If you plan to borrow for 6 months at the end of year 1, what rate you expect to see? How do you lock in this rate, if there is no bank that would agree to guarantee it?
1. You expect to see the 6 month FR, 1 year from now i.e. 9.87% FR.
2. The position can be synthetically replicating by shorting a 1.5 year Zero-coupon bond and buying a 1 year zero-coupon bond.
Bond Period Year Coupon Price YTM Spot Forward A 1 0.5 4.8 101.78 1.22% 1.22% 1.22%...
1. Consider a bond paying a coupon rate of 12.25% per year semiannually when the market interest rate is only 4.9% per half-year. The bond has six years until maturity. a. Find the bond's price today and twelve months from now after the next coupon is paid. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What is the total rate of return on the bond? (Do not round intermediate calculations. Round your answer to 2...