Sequence of spot rates and forward rates

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Reference no: EM133058544

Use the following information.  All bonds  are issued by US Treasury and will pay coupons annually.   

Bond 

A

B

C

D

E

Issuer 

Treasury 

Treasury 

Treasury 

Treasury 

Treasury

Face Value 

100

100

100

100

100

Coupon Rate 

3.0%

3.0%

3.0%

3.0%

3.0%

Price 

100

 

 

 

 

Maturity 

1

2

3

4

5

The sequence of spot rates and forward rates are shown below,

Time to Maturity 

Spot (0Rn)

Forward (n-1Fn)

1

3.0000%

3.000%

2

2.9000%

2.800%

3

 

2.700%

4

 

2.600%

5

 

2.500%

An investor considers the purchase of 1-year annual zero-coupon Bond H to be issued 1 year from today with a face value of $100. The price of the Bond H is closet to:

97.266

97.276

98.266

98.276

An investor considers the purchase of 2-year annual zero-coupon Bond I to be issued 1 year from today with a face value of $100. The price of the Bond I is closet to:

94.719

95.719

96.719

97.719

An investor considers the purchase of 2-year annual zero-coupon Bond J to be issued 2 year from today with a face value of $100. The price of the Bond J is closet to:

92.903

93.903

94.903

95.903

An investor considers the purchase of 2-year annual 5%-coupon Bond K with a face value of $100, currently trading at a Z-spread of 50 bps. The price of the Bond K is closet to: 

100.039

101.039

102.039

103.039

Reference no: EM133058544

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