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    Harvard university
    Feb-1997 - Aug-2003

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Category > Business & Finance Posted 23 Jun 2017 My Price 12.00

Use the following curve to answer questions

Use the following curve to answer questions 1 - 3 Spot
1 yr forward
Maturity Rate
curve
1
0.30%
0.30%
2
0.70%
1.10%
3
1.20%
2.21%
4
1.50%
2.41%
5
1.80%
3.01%
6
2.10%
3.61%
7
2.25%
3.15%
8
2.40%
3.46% 1. Determine the forward (break even rate) for the 1 year bond in 3 years and explain the forward expectation for
future 1 year spot rates in three years under the pure expectations theory.
2. Determine the forward break even rate for the 2 year bond in 3 years and explain the forward expectation for
future 2 year spot rates in three years under the pure expectations theory.
3. Determine the forward break even rate for the 4 year bond in 4 years and explain the forward expectations for
future 4 year spot rates in four years under the pure expectations theory.
Fixed Income
4. Determine the fair value (dollar price) of a 6% coupon US Treasury maturing in 20 years if its required return is
2.5%. Determine market value for $25,000 face (par) value.
5. Determine the fair value (dollar price) of a 3% coupon US Treasury maturing in 15 years if its required return is
1.75%. Determine market value for $35,000 face (par) value.
6. Determine the fair value (dollar price) of a 0% coupon US Treasury maturing in 7 years if its required return is
1.25%. Determine market value for $45,000 face (par) value.
7. Determine the YTM (expected return) for a 6% coupon US Treasury maturing in 10 years if it trades at a dollar
price of $115.35.
8. Determine the YTM (expected return) for a 2.5% coupon US Treasury maturing in 13 years if it trades at a dollar
price of $90.25.
9. Determine the YTM (expected return) for a 0% coupon US Treasury maturing in 19 years if it trades at a dollar
price of $76.55.

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Answers

SuperTutor
(15)
Status NEW Posted 23 Jun 2017 04:06 AM My Price 12.00

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