Homework Answers
a. The forward rate of 1 year loan beginning in two years = (1+0.05)^3/(1+0.04)^2 -1 = 0.070289 =0.0703
The forward rate of 1 year loan beginning in two years = 7.03%
b. Price of a four year zero coupon bond = (1/1.05^3) * 0.84 = 0.7256
Price of a four year zero coupon bond = 0.7256
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14, A one-year zero coupon bond yields 3.0%. The two-and three-year zero-coupon bonds yield 4.0% and 5.0% respectively. a. The forward rate for a one-year loan beginning in two years is closest t...
Consider the following zero‐coupon yield curve developed from current yields on risk-free securities: Maturity (years) Zero-Coupon...
Consider the following zero‐coupon yield curve developed from
current yields on risk-free securities:
Maturity (years) Zero-Coupon Yield 1 2 4 5 4.80% 5.00% 5.20% 5.50% 5.80% The forward rate for year 4 (the forward rate quoted today for an investment that begins in three years and matures in four years) is closest to: 5.50% а. 1.38% b. 5.35% С. 6.40% Od. 5.97% е. Ln
19. Suppose that a bond that will mature in two years has a face value of...
19. Suppose that a bond that will mature in two years has a face value of $1000 and 20% coupon rate (coupons are paid annually. The one year spot rate is 13% and the second year's forward rate is 12%. According to the pure expectation hypothesis, the price of the bond is A) $1125.16 B) $1000 C) $1325.50 D) $1200 Consider the following zero-coupon yields on default-free securities: Maturity (years) YTM% 5.80 5.50 5.20 5.00 4.80 6. The forward rate...
You are given the following information: The yield of a one year zero coupon bond is...
You are given the following information: The yield of a one year zero coupon bond is 2.0% while the yields on a 2 and 3 year fixed coupon bonds are 2.5% and 3.5% respectively. What is the 2-year Zero Rate? Answer this :What is the expected one-year interest rate two years from today?
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 3.0% 3.6% 3.8% 4.1% 4.3% What is the price today of a two-year, default-free
Assume the zero-coupon yields on default-free securities are as summarized in the following table:Maturity1 year2 years3 years4 years5 yearsZero-Coupon Yields3.0%3.6%3.8%4.1%4.3%What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? Does this bond trade at a discount, at par, or at a premium? Note: Assume annual compounding.
1. The following table provides zero coupon bond yields. Maturity Bond equivalent yield 6 months 6%...
1. The following table provides zero coupon bond yields. Maturity Bond equivalent yield 6 months 6% 1 year 8% A 12% coupon bond with coupons paid semiannually matures in one year. The par value of the bond is $1,000. What is the price of this bond? [First identify the cash flows.] A. $1,030 B. $1,032 C. $1,034 D. $1,038 2. The following are the prices of zero coupon bonds. Par value is $1,000 in each case. Maturity Price 6 months...
A zero coupon bond of term 3 years has a continuously compounding yield of 5.85%. A zero coupon bond of term 5 years has a continuously compounding yield of 8.95%. Use Excel to compute the two year quarterly compounding rate 3 years forward.
A zero coupon bond of term 3 years has a continuously compounding yield of 5.85%. A zero coupon bond of term 5 years has a continuously compounding yield of 8.95%.Use Excel to compute the two year quarterly compounding rate 3 years forward.
Problem 7.1 We are given the following yield curve: spot rate year 5.0% 4.5% 4.0 % 2 3 4.0% 4.0% 4 A 3-year $1,000 par...
Problem 7.1 We are given the following yield curve: spot rate year 5.0% 4.5% 4.0 % 2 3 4.0% 4.0% 4 A 3-year $1,000 par value bond with annual coupon payments has yield curve above coupon rate of 4%. Use the a (a) find the price P. (b)* find the yield to maturity
Problem 7.1 We are given the following yield curve: spot rate year 5.0% 4.5% 4.0 % 2 3 4.0% 4.0% 4 A 3-year $1,000 par value bond...
9. (10 points) Suppose that the spot in spot interest rate on a two-year zero-com year...
9. (10 points) Suppose that the spot in spot interest rate on a two-year zero-com year Zero-coupon bond is 40 ar zero-coupon bond is 3.0%, the Assume annual compound a. (6 points) Based on the pure expectat is the expected one-year inte approximation from class.) se that the spot interest rate one-year zero-coupon Zero-coupon bond is 4.0 and the spot interest rate on a three al compounding throughout the problem. points) Based on the nume r ations theory of the...
9. The market prices of zero coupon bonds are as follows Time to maturi Price 97.08 93.35 88.90 83.86 4 (a) Compute the one-year forward rate and the two-year forward rate one-year from now [i.e. com...
9. The market prices of zero coupon bonds are as follows Time to maturi Price 97.08 93.35 88.90 83.86 4 (a) Compute the one-year forward rate and the two-year forward rate one-year from now [i.e. compute fi2 and fi 31. Express them in annualized form. 4% and 4.5% (b) Suppose you can enter a contract to borrow or lend at a one-year forward rate [ h+2 ] of 4.5%. You can take long or short positions in any of the...
A one year zero coupon treasury bond yields 3.26% and a two year zero coupon treasury...
A one year zero coupon treasury bond yields 3.26% and a two year zero coupon treasury yields 5.61%. What is the expected 1 year interest rate 1 year from now, assuming no-arbitrage pricing and no liquidity premium?
Consider the following zero‐coupon yield curve developed from
current yields on risk-free securities:
Maturity (years) Zero-Coupon Yield 1 2 4 5 4.80% 5.00% 5.20% 5.50% 5.80% The forward rate for year 4 (the forward rate quoted today for an investment that begins in three years and matures in four years) is closest to: 5.50% а. 1.38% b. 5.35% С. 6.40% Od. 5.97% е. Ln
19. Suppose that a bond that will mature in two years has a face value of $1000 and 20% coupon rate (coupons are paid annually. The one year spot rate is 13% and the second year's forward rate is 12%. According to the pure expectation hypothesis, the price of the bond is A) $1125.16 B) $1000 C) $1325.50 D) $1200 Consider the following zero-coupon yields on default-free securities: Maturity (years) YTM% 5.80 5.50 5.20 5.00 4.80 6. The forward rate...
Problem 7.1 We are given the following yield curve: spot rate year 5.0% 4.5% 4.0 % 2 3 4.0% 4.0% 4 A 3-year $1,000 par value bond with annual coupon payments has yield curve above coupon rate of 4%. Use the a (a) find the price P. (b)* find the yield to maturity
Problem 7.1 We are given the following yield curve: spot rate year 5.0% 4.5% 4.0 % 2 3 4.0% 4.0% 4 A 3-year $1,000 par value bond...
9. (10 points) Suppose that the spot in spot interest rate on a two-year zero-com year Zero-coupon bond is 40 ar zero-coupon bond is 3.0%, the Assume annual compound a. (6 points) Based on the pure expectat is the expected one-year inte approximation from class.) se that the spot interest rate one-year zero-coupon Zero-coupon bond is 4.0 and the spot interest rate on a three al compounding throughout the problem. points) Based on the nume r ations theory of the...
9. The market prices of zero coupon bonds are as follows Time to maturi Price 97.08 93.35 88.90 83.86 4 (a) Compute the one-year forward rate and the two-year forward rate one-year from now [i.e. compute fi2 and fi 31. Express them in annualized form. 4% and 4.5% (b) Suppose you can enter a contract to borrow or lend at a one-year forward rate [ h+2 ] of 4.5%. You can take long or short positions in any of the...
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