Three-year fixed-coupon bond paying coupon rate

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Reference no: EM13848446

Today’s zero-rate curve is summarized in the table below.

Time period (years)        Zero rate %pa

0.5          5.755

1.0          6.250

1.5          6.455

2              6.555

2.5          6.600

3              6.610

Calculate the price (per $100 par value), to three decimal places, of a three-year fixed-coupon bond paying a coupon rate of 9% pa if the bond pays coupons every half year. Assume that the bond is default-free and that a coupon has just been paid -- that is, price the bond on an ex-interest basis.

Hint: find the bond price as the present value of its future cash flows, using the discount factors retrieved from the zero-rate curve that we discussed in class.

Reference no: EM13848446

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