What are the corresponding per annum zero rates

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Use the following information for questions 5 to 8. The 1-year, 2-year, 3-year and 4-year zero rates are 4%, 5%, 6% and 7% per annum with monthly compounding.

a) What are the zero coupon bond prices with maturities of 1 year, 2 years, 3 years and 4 years? (Assume that you receive a face value of $1 for each of these bonds on their maturity dates).

b) What are the corresponding per annum zero rates with continuous compounding?

c) What is the forward rate for an investment initiated two years from today and maturing 3 years from today. (Give your answer per annum with continuous compounding)?

d) What is the forward rate for an investment initiated two years from today and maturing 4 years from today. (Give your answer per annum with continuous compounding)?

Reference no: EM131981082

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