Compounded at the stated frequency per annum

Reference no: EM133377127

Question - The following spot rates are extracted from Treasury bond prices (APR with semiannual compounding):

Maturity (yrs)	Rate (%)	Maturity (yrs)	Rate (%)	Maturity (yrs)	Rate (%)
0.25	3.33	2.75	3.86	5.25	3.39
0.50	3.49	3.00	3.83	5.50	3.31
0.75	3.62	3.25	3.80	5.75	3.24
1.00	3.71	3.50	3.76	6.00	3.15
1.25	3.79	3.75	3.72	6.25	3.05
1.50	3.84	4.00	3.67	6.50	2.94
1.75	3.87	4.25	3.62	6.75	2.81
2.00	3.88	4.50	3.57	7.00	2.67
2.25	3.89	4.75	3.51	7.25	2.50
2.50	3.88	5.00	3.45	7.50	2.31

Use the spot rates in the table to determine the price of the following bonds (assuming $100 par for all bonds):

A 5-year coupon bond paying 7% semiannually (3%)
A 3-year coupon bond paying 4% quarterly (3%)
A 6.75-year coupon bond paying 6% annually (5%)
A 3-year coupon bond paying coupons quarterly, at the 3% rate next year, 4% rate in year 2, and 5% rate in the final year (6%)

Note that all coupon rates are quoted as APR, compounded at the stated frequency per annum. In case of bonds with accrued interest, you should calculate both full price and quoted price.

Reference no: EM133377127

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