What is the forward rate for year 4-5

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Reference no: EM13302960

You have estimated the spot rates as follows, r1=5%, r2=5.4%, r3=5.7%, r4=5.9% and r5=6%. Suppose the face value is $1000.

a) Find the price of the following bonds with annual coupons: i) Bonds with maturity of five years and coupon
rate of 5%, ii) Bonds with maturity of five years and coupon rate of 10%
b) Obtain the yield-to-maturity of the bonds in part a
c) What should be the yield-to-maturity on a 5-year zero-coupon bond?
d) What is the yield-to-maturity of a five-year annuity with $1 annual payments?
e) What is the forward rate for year 4-5?

Reference no: EM13302960

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