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Business, 20.09.2019 20:30 evansh78

Setup: you observe the following market prices and rates: a 1 year bond with a coupon of 4% is trading at a yield of 5% a 2 year bond with a coupon of 5% is trading at a yield of 6% (a): find the prices for both bonds assuming the coupons and yields use annual compounding. (b): using only the prices you found in (a), determine the price of a 2-year zero coupon bond. (c): find the spot rate curve (i. e. the 1y and 2y points) using continuous compounding. (d): find the forward rate between years 1 and 2 using continuous compounding.

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