a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price of Bond YTM Maturity (Years) 1 $ 978.43 2.20 % 2 $ 924.97 % 3 $ 840.12 % 4 $ 784.39 % b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The following is a list of prices for zero-coupon bonds of various maturities.
a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual
coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Price of Bond
YTM
Maturity (Years)
1
978.43
2.20 %
2
924.97
%
3
840.12
%
4
$
784.39
%
b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not
round intermediate calculations. Round your answers to 2 decimal places.)
Price of Bond
Maturity (years)
1
$
978.43
2
924.97
840.12
784.39
Maturity (Years)
Price of Bond
Forward Rate
2
%
3
%
4
%
AWN
3
4
$
$
GA
$
$
$
SA
924.97
840.12
784.39
Transcribed Image Text:The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price of Bond YTM Maturity (Years) 1 978.43 2.20 % 2 924.97 % 3 840.12 % 4 $ 784.39 % b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price of Bond Maturity (years) 1 $ 978.43 2 924.97 840.12 784.39 Maturity (Years) Price of Bond Forward Rate 2 % 3 % 4 % AWN 3 4 $ $ GA $ $ $ SA 924.97 840.12 784.39
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