QN

  

Use the semi-annually compounded yield curve in the following table to price the some fixed income securities:

Maturity T Yield r2 (0, T)

0.50 6.49%

1 6.71%

1.5 6.84%

2 6.88%

(a) 1.5-year zero coupon bond

(b) 2-year coupon bond paying 15% semiannually

(c) 1.5-year coupon bond paying 9% annually

(d) 2-year floating rate bond with zero spread and semiannual payments

(e) 1.5-year floating rate bond with zero spread and annual payments. For this question, assume r1 (−0.5, 0.5) = 6%.

(f) 1.5-year floating rate bond with 40 basis point spread with annual payments. For this question, assume r1 (−0.5, 0.5) = 6%.