A 4-year SGS has a coupon rate of 8% and is priced at $115 today (par value is $100). In addition, you obtain the following spot rate schedule. All rates are semi-annual compounded. What is the spot rate at year 4?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
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Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
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A 109.

A 4-year SGS has a coupon rate of 8% and is priced at $115 today (par value is $100). In addition,
you obtain the following spot rate schedule. All rates are semi-annual compounded. What is the spot
rate at year 4?
year
0.5
1
1.5
2
2.5
3
3.5
spot rate
2.50%
2.75%
3.00%
3.25%
3.50%
3.75%
4.00%
Transcribed Image Text:A 4-year SGS has a coupon rate of 8% and is priced at $115 today (par value is $100). In addition, you obtain the following spot rate schedule. All rates are semi-annual compounded. What is the spot rate at year 4? year 0.5 1 1.5 2 2.5 3 3.5 spot rate 2.50% 2.75% 3.00% 3.25% 3.50% 3.75% 4.00%
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