The following is a list of prices for zero-coupon bonds of various maturities. Price of Bond Maturity (years) 1 $ 980.90 2 3 4 Required: 914.97 843.12 771.76 a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The following is a list of prices for zero-coupon bonds of various maturities.
Maturity
(years)
1
2
3
4
Price of
Bond
$ 980.90
914.97
843.12
771.76
Required:
a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual
coupon payments.
b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.
Complete this question by entering your answers in the tabs below.
Required A Required B
Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four
years. Assume annual coupon payments.
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Maturity (Years)
Price of Bond
YTM
1
$
980.90
%
2
$
914.97
%
3
$
843.12
%
Transcribed Image Text:The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) 1 2 3 4 Price of Bond $ 980.90 914.97 843.12 771.76 Required: a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Maturity (Years) Price of Bond YTM 1 $ 980.90 % 2 $ 914.97 % 3 $ 843.12 %
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