Suzanne Evans
Well-Known Member
Questions:
202.1. Two risk-free bonds currently trade: A 5-year 2.0% annual coupon bond prices at $86.00, and a 5-year 6.0% annual coupon bond prices at $91.00 What is the implied 5-year zero rate with continuous compounding?
a. 1.4%
b. 2.5%
c. 3.6%
d. 4.7%
202.2. A 10-year bond pays a semi-annual 4.0% coupon and sells for $67.48 with semi-annual compounding. What is the bond's implied yield (YTM) with continuous compounding?
a. 7.71%
b. 8.80%
c. 9.55%
d. 9.67%
202.3. The price of a four-year zero-coupon bond is $92.33 and the price of a six-year zero coupon bond is $84.55. What is the implied two-year forward rate from year four to year six, if all rates are continuously compounded?
a. 1.90%
b. 2.50%
c. 3.85%
d. 4.40%
Answers:
202.1. Two risk-free bonds currently trade: A 5-year 2.0% annual coupon bond prices at $86.00, and a 5-year 6.0% annual coupon bond prices at $91.00 What is the implied 5-year zero rate with continuous compounding?
a. 1.4%
b. 2.5%
c. 3.6%
d. 4.7%
202.2. A 10-year bond pays a semi-annual 4.0% coupon and sells for $67.48 with semi-annual compounding. What is the bond's implied yield (YTM) with continuous compounding?
a. 7.71%
b. 8.80%
c. 9.55%
d. 9.67%
202.3. The price of a four-year zero-coupon bond is $92.33 and the price of a six-year zero coupon bond is $84.55. What is the implied two-year forward rate from year four to year six, if all rates are continuously compounded?
a. 1.90%
b. 2.50%
c. 3.85%
d. 4.40%
Answers:
