Explanation:
| Time | CF | DF | PV |
|---|---|---|---|
| 0.5 | 2.5 | × e^(-0.026/2×1) | 2.47 |
| 1.0 | 2.5 | × e^(-0.027/2×2) | 2.43 |
| 1.5 | 2.5 | × e^(-0.028/2×3) | 2.40 |
| 2.0 | 102.5 | × e^(-0.029/2×4) | 96.72 |
| 104.02 |
(Book 4, Module 55.1, LO 55.a)
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Question 98
What is the value of a two-year, 5% semiannual coupon, $100 par bond using the following annualized spot rates and assuming continuous compounding?
| Maturity | Spot Rate |
|---|---|
| 0.5 | 2.6% |
| 1.0 | 2.7% |
| 1.5 | 2.8% |
| 2.0 | 2.9% |
A
$104.02.
B
$105.62.
C
$106.02.
D
$107.52.
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