The following table gives the prices of bonds.
Bond Time to Annual Bond
Principal Maturity Coupon Price
100 0.50 0.0 98
100 1.00 0.0 95
100 1.50 6.2 101
100 2.00 8.0 104
Half of the stated coupon is paid every six months.
(a) Calculate Zero rates with continuous compounding for 6 12, 18 and 24 months to maturity:
(b) What are the forward rates for the periods 6 to 12, 12 to 18, and 18 to 24 months:
(c) Skip
(d) Estimate the (continuous discounting) price and yield of a two-year bond providing a semiannual coupon of 7% per annum: