Interest rates are expressed as annualized rates for the term specified. Report your interest rate answers as fractional numbers like 0.11 for 11% per year.
Problem C. If a half-year C1 percent coupon bond (paying twice per year) is trading at C2 and a one-year C3 percent coupon bond (paying twice per year) is trading at C4, find half-year and one-year discount factors. The face value of either bond is $100. Assume semi-annual compounding. Write your answers for the following:
1. Half-year discount factor.
2. One-year discount factor.
3. Half-year spot interest rate.
4. One-year spot interest rate.
5. Forward rate for 6 to 12 months.
C1=9
C2=104.4
C3=15
C4=111.2