Theoretical spot rates appropriate

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Question 1. You are trying to price a bond with $1000 face value using the following yield curve. The bond will mature in exactly 4 years and pays semi-annual coupon at a rate of 8%.

a. Assuming that YTM for years 0.5 and 1 are from zero-coupon bonds. Find the theoretical spot rates for other maturities (1.5 Years to 4 Years}.

b.  In What is the price of the bond using theoretical spot rates appropriate for each coupon and principal?

c. What is the YTM of this bond?

Time (year) YTM (‘51:)

0 .5 5.25

1 5. 5

1 .5 5.?5

2 6

2 .5 6.25

3 6. 5

3 .5 6.?5

4 6. B

Reference no: EM131482971

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