Question
Estimate term structure of discount factors, spot rates and forward rates by using data on five...
Estimate term structure of discount factors, spot rates and forward rates by using data on five semi-annual coupon paying bonds with $100 face value each: The bonds, respectively, have 1.25, 5.35, 10.4, 15.15 and 20.2 years to maturity; pay coupon at annual rates of 4.35, 5.25, 6.25, 7.25, and 8.25 percent of face value; and are trading at quoted spot market prices in dollars of 98.25, 99.25, 100.25, 101.25 and 102.25 . Specify the discount factor function d(t) by a third degree polynomial with unknown parameters a, b, and c . Using estimated d(t) function, determine spot rate and forward rate functions by assuming half-year compounding. Then write the values of the following based on your estimation.
27.Spot rate for term 2 year.
28.Spot rate for term 5 year.
29.Spot rate for term 10 year.
30.Spot rate for term 17 year.
PLEASE SHOW WORK THANK YOU!!
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Estimate term structure of discount factors, spot rates and forward rates by using data on five...
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