Calculate zero rates with continuous compounding

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Reference no: EM131839711

The following table gives the prices of bonds.

Bond Time to Annual Bond

Principal Maturity Coupon Price

100 0.50 0.0 98

100 1.00 0.0 95

100 1.50 6.2 101

100 2.00 8.0 104

Half of the stated coupon is paid every six months.

(a) Calculate Zero rates with continuous compounding for 6 12, 18 and 24 months to maturity:

(b) What are the forward rates for the periods 6 to 12, 12 to 18, and 18 to 24 months:

(d) Estimate the (continuous discounting) price and yield of a two-year bond providing a semiannual coupon of 7% per annum:

Reference no: EM131839711

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