From Federal Reserve Economic Data (FRED), we have obtained spot zero rates as follows: Spot zero Year rate 0.5 2% 1 3% 1.5 2 4% 2.5 ? 3 5% We want to calculate the price of a 3-year bond which pays 10% coupon (semi-annual). The face value of the bond is $1,000. However, the problem is that we do not know 1.5-year and 2.5-year spot zero rates. If we use linear interpolation method, what are the 1.5-year and 2.5-year spot zero rates? The 1.5-year spot rate is 3.50% and 2.5-year spot rate is 4.50% The 1.5-year spot rate is 1.75% and 2.5-year spot rate is 2.25% The 1.5-year spot rate is 1.70% and 2.5-year spot rate is 2.20% The 1.5-year spot rate is 3.40% and 2.5-year spot rate is 4.40%
From Federal Reserve Economic Data (FRED), we have obtained spot zero rates as follows: Spot zero Year rate 0.5 2% 1 3% 1.5 2 4% 2.5 ? 3 5% We want to calculate the price of a 3-year bond which pays 10% coupon (semi-annual). The face value of the bond is $1,000. However, the problem is that we do not know 1.5-year and 2.5-year spot zero rates. If we use linear interpolation method, what are the 1.5-year and 2.5-year spot zero rates? The 1.5-year spot rate is 3.50% and 2.5-year spot rate is 4.50% The 1.5-year spot rate is 1.75% and 2.5-year spot rate is 2.25% The 1.5-year spot rate is 1.70% and 2.5-year spot rate is 2.20% The 1.5-year spot rate is 3.40% and 2.5-year spot rate is 4.40%
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
Problem 1PS
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