Solution-Calculate the 2nd year forward rate of a bond

Calculate the 2nd year forward rate of a bond security

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Reference no: EM132807338

1. Assume par values of $1,000 unless otherwise instructed:

(a) What is the price of a 5 year bond (annual payments) with a coupon rate of 5% if the market rates are 8%? Is the bond selling at a premium or discount?

(b) Recomputed the answer with assumption of semi-annual payments.

2. What is the price of a 10 year, semi-annual bond with a coupon of 7.5% if market rates are 6%? What is a price of bond if the coupon rate is zero (i.e., zero-coupon bond)?

3. A bond (semi-annual payments) currently has a price of $1,052.50, a coupon rate of 8%, and time to maturity of 12 years. What is the YTM?

4. Calculate the 2nd year forward rate of a bond security if a one-year bond security YTM is 7% and a two-year bond security YTM is 9%.

Reference no: EM132807338

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Calculate the 2nd year forward rate of a bond security

Reference no: EM132807338

Reference no: EM132807338

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