Consider the following data for bonds A,B,and C:
$\begin{array} { l l l l c }
& \text { price } & & { \text { cash flows } } \
& t = 0 & t = 1 & t = 2 & t = 3 \
\text { A } & \$ 900 & \$ 1,000 & 0 & 0 \
\text { B } & \$ 1,000 & \$ 100 & \$ 1,100 & 0 \
\text { C } & \$ 900 & \$ 50 & \$ 50 & \$ 1,050
\end{array}$
a. Calculate the forward and spot rates for each period.
b. What is the value of the discount function for the first period?
c. What is the yield to maturity for bond C assuming annual payment periods?

Question

Consider the following data for bonds A,B,and C:
$\begin{array} { l l l l c } 
& \text { price } & & { \text { cash flows } } \
& t = 0 & t = 1 & t = 2 & t = 3 \
\text { A } & \$ 900 & \$ 1,000 & 0 & 0 \
\text { B } & \$ 1,000 & \$ 100 & \$ 1,100 & 0 \
\text { C } & \$ 900 & \$ 50 & \$ 50 & \$ 1,050
\end{array}$
a. Calculate the forward and spot rates for each period.
b. What is the value of the discount function for the first period?
c. What is the yield to maturity for bond C assuming annual payment periods?

Quizplus · Accepted Answer

The Answer of Consider the following data for bonds A,B,and C:
$\begin{array} { l l l l c } 
& \text { price } & & { \text { cash flows } } \
& t = 0 & t = 1 & t = 2 & t = 3 \
\text { A } & \$ 900 & \$ 1,000 & 0 & 0 \
\text { B } & \$ 1,000 & \$ 100 & \$ 1,100 & 0 \
\text { C } & \$ 900 & \$ 50 & \$ 50 & \$ 1,050
\end{array}$
a. Calculate the forward and spot rates for each period.
b. What is the value of the discount function for the first period?
c. What is the yield to maturity for bond C assuming annual payment periods?

Consider the Following Data for Bonds A,B,and C A Calculate the Forward and Spot Rates for Each Period