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.
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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,
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rates of 4.35, 5.25, 6.25, 7.25, and 8.25 percent of face value;
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99.25, 100.25, 101.25 and 102.25 . Specify the discount factor
function d(t) by a...
Use the term structure below for problems 1 – 2: Maturity Spot Rate Forward Rate 1...
Use the term structure below for
problems 1 – 2:
Maturity
Spot Rate
Forward Rate
1
4.0%
2
4.25%
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4.75%
4
5.25%
5
6.0%
6
6.75%
Calculate the 1-year forward rate as quoted today (year zero)
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0 1 2 3 4 5
6
|____________|____________|____________|____________|____________|____________|
Calculate the 2-year forward rate as quoted today (year zero)
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In January 2020, the term-structure of spot rates is as follows (with continuous compounding): Maturity (years)...
In January 2020, the term-structure of spot rates is as
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Maturity (years) Zero-rate(%)
1 2.0
2 3.0
3 4.0
(a) A 3-year zero-coupon bond has the face value of $1,000.
Consider a 1-year forward
contract on the zero coupon bond. What should be the forward
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(b)Suppose that an investor takes a long position in the above
forward contract. One year
later, in January 2021, the term-structure turns out to be as
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Maturity (years) Zero-rate(%)...
Currently, in October 2020, the term-structure of spot rates is as follows (with continuous compounding): Maturity...
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Maturity (years)
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1
1.0
2
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3
3.0
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Time to Maturity
Spot Rate
0.5
2.00%
1.0
3.00%
1.5
3.50%
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4.00%
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1. Compute the six-month forward curve, i.e. compute
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In all the following questions, enter percentages in...
Bond Period Year Coupon Price YTM Spot Forward A 1 0.5 4.8 101.78 1.22% 1.22% 1.22%...
Bond
Period
Year
Coupon
Price
YTM
Spot
Forward
A
1
0.5
4.8
101.78
1.22%
1.22%
1.22%
B
2
1
5.4
102.25
3.10%
3.12%
5.05%
C
3
1.5
6.2
101.34
5.26%
5.35%
9.87%
D
4
2
8.1
106.4
4.71%
4.76%
3.01%
The table above reports the prices and coupons of four bonds, as
well as some implied rates. The coupons are paid semiannually.
The rates in the table are APR (Answers should
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1
2
3
4
5
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2.1
2.6
3.2
3.5
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Suppose that the expectations hypothesis holds and that the current term structure of interest rates is...
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• y1 = 5%
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realizing at year one, E(1y3)?
b. What is the expected price of a two-year zero-coupon bond
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