Bond quote Face value ($) Time to maturity (years) Annual coupon payments (paid semi-annually) bond price ($) zero rate 100 0.5 0 98 4.0405% 100 1 0 97 ? 100 1.5 15 115 ? 100 2 20 ? 5.500%   Using the Table above,  find the appropriate zero rates for1 year find the appropriate zero rates for 1.5 year find the 2-year bond price

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...
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Bond quote

Face value ($)

Time to maturity (years)

Annual coupon payments (paid semi-annually)

bond price ($)

zero rate

100

0.5

0

98

4.0405%

100

1

0

97

?

100

1.5

15

115

?

100

2

20

?

5.500%

 

Using the Table above, 

  1. find the appropriate zero rates for1 year
  2. find the appropriate zero rates for 1.5 year
  3. find the 2-year bond price
  4. find the par-yield for the 2-year-maturity bond

*Note1: zero rate for the 6 month period is done for you.

*Note 2: coupon payments given are yearly coupon payments, which these will be paid out semi-annually (i.e. every 6 months)

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