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What is the coupon payment of the bond

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Reference no: EM132616004

Unless otherwise specified, the face value M of all bonds at all maturities discussed is $100 (per unit); risk-free interest rates are annualized; and coupon payments are made annually.

Notation conventions for this module: yt is the YTM today for a zero coupon bond with maturity t years.

Kindly answer in two decimals

Suppose the 1-year, 2-year and 3-year zero-coupon bonds are trading at $97, $98 and $99, respectively. If the no-arbitrage condition holds, what is the market price of a 3-year coupon bond with $5 coupon payment?

Suppose that the YTM of the 1-year, 2-year, and 3-year zero coupon bonds are 2%, 3% and 3.5%, respectively. What is the market price of a 2-year coupon bond with an annual coupon payment of $4?

Hint: Goal Seek will be needed. A 3-year coupon bond is trading at $106.8. Using the same YTMs as in the previous question, what is the coupon payment of the bond?

Reference no: EM132616004

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