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ACTSC 231 Tutorial 6
Dec 1, 2009
1.
If the current rates for risk-free investments are 0.5% for 6 months, 1.25% for 1 year,
1.5% for 18 months, and 2.25% for 2 years (these rates are taken from INGDirect),
calculate the fair (arbitrage-free) price of a 2-year 5% $1000 par value bond with
semiannual coupons.
2.
Consider the yields of 4% par bonds with annual coupons.
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Unformatted text preview: 1 year 1.435% 2 year 2.842% 3 year 3.624% 4 year 3.943% 5 year 4.683% Determine the 3-year ahead 2-year forward rate. 3. Calculate the Macaulay duration of a twenty-five year mortgage with level monthly payments, if the nominal interest rate convertible monthly is 12%. Hint: work in time periods of months instead of years....
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- Fall '09
- Chisholm
- Finance, $1000, 1.5%, 0.5%, 1.25%
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