2. You are holding a 3-year bond with coupon rate 10%. Coupon payments are annual and par values are 100. Spot rates are: ri 5%, r2 = 6%, r3 = 6.5%. = (a) Determine as many forward rates as you can based on the spot rates above. (b) You would like to get a guaranteed 3-year return on your coupon bond. Explain how this can be achieved using forward rates. Which forward rates should you use? What is your guaranteed 3-year return?

You have a bond with the following features: - Semi-annual coupon payments. - Coupon rate 7.60%. - Face value $1,000. - 3.5 years to maturity. - Current market price $1,130. Requirements (A, B, and C are independent): 1. Calculate the duration and modified duration for this bond. Duration  ___ Mduration  ___ 2. Now, let’s assume the modified duration of this bond is 3 years. If the yield increases by 30 bps (basis points), what will the new price of the bond using modified duration?   3. If the yield drops by 75 bps, what is the actual new price of the bond?

Consider a 5 year non-call 3 year bond that is callable in 3 year and 4 year at prices of 101 and 100. It pays an annual coupon of 4% and is priced at 101. What is the yield-to-worst for this bond?

You are considering a 10-year, Rs. 1000 par value bond. Its coupon rate is 10% and interest is paidsemiannually. If you require an effective annual interest rate of 8%, how much should you be willingto pay for the bond? Is effective annual interest rate differing from coupon rate? Explain.

In calculating the current price of a bond paying semiannual coupons, one needs to O use double the number of years for the number of payments made. O use the semiannual coupon. O use the semiannual rate as the discount rate. O All of the above needs to be done.

Find the price of the bond. Solve the question without using Excel and provide the necessary calculations.