# Calculate Yield To Maturity And Forward Rate

Question

Suppose the prices of zero-coupon bonds are as given in the table below, and each bond has a face value of \$1,000.

 Bond Price Maturity (years) A \$955.94 1 B \$870.22 2 C \$790.50 3 D \$715.28 4 E \$644.14 5

a. Calculate the yields to maturity for the five bonds.

b. Compute the forward rate for each year.

c. How would you construct a one-year forward loan beginning in year 2?

Total Word Count 50

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