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Find the forward interest rate

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The current price of a 6- month zero coupon bond with a face value of $100 is 93.85. If a 9- month strip with a face value of $100 is currently trading for 92.85, find the forward interest rate for the 6 to 9 month period. Solve by both continuous compounding and quarterly compounding. Write your answers for the following:

1. Six-month spot interest rate for quarterly compounding.

2. Nine-month spot interest rate for quarterly compounding.

3. Forward rate (6 to 9months) for quarterly compounding.

4. Six-month spot interest rate for continuous compounding.

5. Nine-month spot interest rate for continuous compounding.

6. Forward rate (6 to 9months) for continuous compounding.

7. What is the guaranteed fair price of a 3-month T-Bill to be deliveredat 6months from now, assuming quarterly compounding?

8. What is the guaranteed fair price of a 3-month T-Bill to be delivered at 6 months from now, assume continuous compounding?

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Reference no: EM131976017

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