Evaluate the half-year discount factor

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Reference no: EM131928542

Interest rates are expressed as annualized rates for the term specified. Report your interest rate answers as fractional numbers like 0.11 for 11% per year.

Problem C. If a half-year C1 percent coupon bond (paying twice per year) is trading at C2 and a one-year C3 percent coupon bond (paying twice per year) is trading at C4, find half-year and one-year discount factors. The face value of either bond is $100.

Assume semi-annual compounding.

Write your answers for the following:

1. Half-year discount factor.

2. One-year discount factor.

3. Half-year spot interest rate.

4. One-year spot interest rate.

5. Forward rate for 6 to 12 months.

C1=9

C2=104.4

C3=15

C4=111.2

Reference no: EM131928542

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