Calculate the 6 monthly discount factors

Reference no: EM139576

Question: Maturity 6m 1yr 2yr 3yr 5yr 7yr 10yr YTM (%) 0.07 0.11 0.37 0.76 1.61 2.24 2.78 Any required rates for other maturities should be computed using the linear interpolation method. (E.g. 9yr YTM = 2.24% + (2.78% - 2.24%) × 2/3 = 2.60%).

(1) Calculate the 6 monthly discount factors D(t) and the semi-annual zero coupon rates z(t), where t = 0.5, 1, 1.5, ., 9.5, 10. (2) Using the discount factors derived in (1), calculate the price of a 4½ year semi-annual coupon bond with an annual coupon rate of 4% and the face value 100. (3) Given the bond price derived in (2), estimate, using a try-and-error method or otherwise, the YTM of this 4½ year coupon bond. Why is this bond's YTM different to the market 4½ year rate estimated above?

Reference no: EM139576

Questions Cloud

Prepare an income statement and compute earnings per share : A. Low Carb Diet Supplement, Inc. has two divisions. Division A has a profit of $100,000 on sales of $2,000,000. Division B is only able to make $25,000 on sales of $300,000. Based on the profit margins (returns on sales), which division is superior?

What is the mechanism that generates this diversity : Question: The genomes of (+) RNA viruses can be translated immediately upon cellular entry, even though they do not possess a 5' 7-methylguanosine cap due to the presence of this structure at the 5' end of the genome [x]

What is opportunity cost : What is opportunity cost? Explain with the help of an example, why assumption of constant opportunity cost is very unrealistic? Explain law of demand with the help of a demand schedule and demand curve.

Describe the evolutionary process of organization design : Describe the evolutionary process of organization design and different perspectives of organization design and their relevance. Explain the meaning and purpose of Job design and briefly discuss the impact technology has on Job design.

Calculate the 6 monthly discount factors : Calculate the 6 monthly discount factors D(t) and the semi-annual zero coupon rates z(t), where t = 0.5, 1, 1.5, ., 9.5, 10. (2) Using the discount factors derived in (1), calculate the price of a 4½ year semi-annual coupon bond with an annual coupon..

What is the present value of your equity holdings : What is the present value of your equity holdings under the scenario where the firm plans to borrow $150K in the third year? How does this differ from your answer to a)? How does your answer contrast with the answer in Question 5? Explain the differe..

Drilling fluid engineering manual : Read the titled books Drilling Fluid Engineering Manual. Textbook prepared by M-I Drilling Fluids Co.,1998; Halliburton Cementing Tables. Casing and cement data tables prepared by Halliburton Company.

Prepare a 20x8 consolidated income statement : Assume that Go-med is a joint venture owned by Insure and four other venturers, that the acquisition differentials are valid, and that it has not yet adopted IFRS 11: Joint Arrangements. Prepare a 20X8 consolidated income statement for Insure using ..

Apply general attribution theory to analyze : Apply general attribution theory to analyze and explain each party's attitudes and conclusions. Hint: Use consensus, consistency, distinctiveness, and the fundamental error.

User Account

All Pages