The current price of a 6- month zero coupon bond with a face value of $100 is 93.85. If a 9- month strip with a face value of $100 is currently trading for 92.85, find the forward interest rate for the 6 to 9 month period. Solve by both continuous compounding and quarterly compounding. Write your answers for the following:
1. Six-month spot interest rate for quarterly compounding.
2. Nine-month spot interest rate for quarterly compounding.
3. Forward rate (6 to 9months) for quarterly compounding.
4. Six-month spot interest rate for continuous compounding.
5. Nine-month spot interest rate for continuous compounding.
6. Forward rate (6 to 9months) for continuous compounding.
7. What is the guaranteed fair price of a 3-month T-Bill to be deliveredat 6months from now, assuming quarterly compounding?
8. What is the guaranteed fair price of a 3-month T-Bill to be delivered at 6 months from now, assume continuous compounding?
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