Calculate the equivalent six-month spot rate

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Problem

Assume that you are an investment analyst, and you were provided with the information illustrated in the below table to come up with the 6-month and 12-month spot rate that a company can use to analyse their returns at the end of the year. All bonds have a face value of R100 and semi-annual coupon payments. Get the instant assignment help.

Bonds Maturity Annual Coupon Price YTM
A 6 months 7% R100 7%
B 12 months 11% R104.29 6.5%
C 18 months 13% R112.41 4.36%.

Calculate the equivalent 6-month spot rate and 12-month spot rate using the bootstrapping method.

Reference no: EM133982953

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