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Use bootstrapping to obtain a continuously compounded zero rate curve given that the price of a 6-month T-bill is 97.5, the price of a 12-month T-bill is 100, and the price of a 20-month T-bond with a 4.5% coupon rate is 107 18/32 (or 107.5625). Use your zero-rate cruve to price a 20-month T-bond with a 3% coupon rate. What are the duration and convexity of this bond? The Treasury bonds pay semiannual coupons.

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Financial Management, Finance

Category:- Financial Management
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