Use the semi-annually compounded yield curve in the following table to price the some fixed income securities:
Maturity T Yield r2 (0, T)
0.50 6.49%
1 6.71%
1.5 6.84%
2 6.88%
(e) 2-year floating rate bond with zero spread and semiannual payments
(f) 1.5-year floating rate bond with zero spread and annual payments. For this question, assume r1 (−0.5, 0.5) = 6%.
(h) 1.5-year floating rate bond with 40 basis point spread with annual payments. For this question, assume r1 (−0.5, 0.5) = 6%.