Chapter 26. Term Structure of Interest Rates: Concepts
15. Using the information about bonds P and Q above, determine the
zero-coupon rate for one-year maturity.
16. Using the information from the questions about bonds P and Q,
determine the price of a bond R that pays a cash ow of $50 in six months and
another cash ow of $50 at the end of one year.
17. Bond W has a coupon of 12% (semiannual basis) and a maturity of
one year, and is trading at $99.25. If the one-year zero-coupon rate is 13%,
what is the half-year zero-coupon rate?
18.
Consider a bond currently trading at $102. The bond has one year
left to maturity and a coupon of 8% on a face value of $100. Suppose coupons
are paid semiannually. What is the YTM of the bond expressed with semiannual
compounding? With continuous compounding?
19.
A bond is currently trading at $99.50. The bond has nine months
left to maturity and carries a coupon of 3%. Coupons are paid semiannually (so
the rst coupon is due in three months). If the bond’s face value is $100, what
is its YTM expressed with semiannual compounding? With continuous compounding?
20.
Consider a bond that pays annual coupons of 7% on a face value of
$100. The bond has two years to maturity. If the YTM of the bond (expressed
with annual compound-ing) is 6.80%, what is its current price? What is the
bond’s YTM under continuous compounding?
21.
A six-month zero-coupon bond is trading at $98 while a one-year 6%
coupon bond is trading at $99. Assume coupons are paid semiannually and that
both bonds have a face value of $100. What are the six-month and one-year
discount functions implied by these prices?
