Problemthe spot rate for three hypothetical zero-coupon, Ask an Expert

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Problem:

The spot rate for three hypothetical zero-coupon bonds (zeros) with maturities of one, two and three years are given in the following table (based on annual compounding).

Maturity(T)	1	2	3
Spot rates	r(1)=11%	r(2)=10%	r(3)=9%

Required:

Question 1: Calculate the forward rate for a one-year zero in one year, f (1,1).

Question 2: Calculate the forward rate for a one-year zero in two years, f (2,1).

Question 3: Calculate the forward rate for a two-year zero in one year, f (1,2).

Question 4: Calculate the price for a 3-year treasury bond with par value of $1,000 and having a 5% coupon rate paid annually.

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91163109

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