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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Comments

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