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DATA:

7.64 5.64 9.64 101.64 97.18 100.41 103.96 98.02 97.02 1.64 99.98 7.64 105.7 9.6 12.6 7.6 102 106 106

Problem B. The current price of a 6-month zero coupon bond with a face value of $100 is B1. If a 9-month strip with a face value of $100 is currently trading for B2, find the forward interest rate for the 6 to 9 month period. Solve by both continuous compounding and quarterly compounding. Write your answers for the following:

1. Six-month spot interest rate for quarterly compounding.

2. Nine-month spot interest rate for quarterly compounding.

3. Forward rate (6 to 9 months) for quarterly compounding.

4. Six-month spot interest rate for continuous compounding.

5. Nine-month spot interest rate for continuous compounding.

6. Forward rate (6 to 9 months) for continuous compounding.

7. What is the guaranteed fair price of a 3-month T-Bill to be delivered at 6 months from now, assuming quarterly compounding?

8. What is the guaranteed fair price of a 3-month T-Bill to be delivered at 6 months from now, assume continuous compounding?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92811847

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