Question

The following is a list of prices for zero-coupon bonds of various maturities.

a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. (Do not round intermediate calculations. Round your answers to two decimal places.)

b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. (Do not round intermediate calculations. Round your answers to two decimal places.)

Maturity (years)	Price of Bond
1	$	935.90
2		906.47
3		837.12
4		775.39

Answer 1

Both the parts are done in the excel itself with solution and formulaes

For calculating YTM on a financial calculator

Say for bond with a maturity of 3 years

Put N= 3

PV as given = -$837.12

PMT = 0

FV = 1000

Get I/Y as 6.11%

And formula for calculating Forward rates is similar to the one given in the excel sheet