Calculate the price of bond

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1. A 1000 par-value bond with a 6% annual coupon rate matures in 3 years. You are given the one-year annual spot interest rate is 7%. The two-year annual spot interest rate is 8%. The one-year forward rate for year 3 is 9%. Calculate the price of the bond.

2. You are given the following spot rates:

Years to Maturity 1 2 3 4 5

Spot Rate 4.00% 4.50% 5.25% 6.25% 7.5%

You enter into a 5-year interest rate swap with a notional amount of 100,000 to pay a fixed rate and to receive a floating rate based on future 1-year LIBOR rates. If the swap has annual payments, what is the fixed rate you should pay?

Reference no: EM131923879

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