ACTSC 231 ch08-eg-soln

ACTSC 231 ch08-eg-soln - 3.0153% 3.5463% 3.8616% 4.2984%...

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Example 8.1 Example 8.1: A two-year bond pays annual coupons of $30 and matures at $1,000. Its price is $984. The same corporation sells a one-year $1,000 zero-coupon bond for $975. Compute the two-year spot rate r 2 . C. Weng (c2weng@uwaterloo.ca) – p. 6/ 9
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Example 8.2 Given the following set of bonds, find the spot rate r 3 . Term 1 year 2 years 3 years 4 years 5 years Yield y 1 = y 2 = y 3 = y 4 = y 5 = 1.7568%
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Unformatted text preview: 3.0153% 3.5463% 3.8616% 4.2984% Assume all the above bonds pay 5% annual coupons. C. Weng (c2weng@uwaterloo.ca) p. 7/ 9 Example 8.3 Ref to e.g. 8.2, find f [2 , 3] . Can we obtain the value of f [1 . 5 , 2 . 5] ? Soln: From e.g. 8.2, r 1 = 1 . 7568% , r 2 = 3 . 0465637% and r 3 = 3 . 59388% . C. Weng (c2weng@uwaterloo.ca) p. 9/ 9...
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This note was uploaded on 01/21/2011 for the course ACTSC 231 taught by Professor Chisholm during the Fall '09 term at Waterloo.

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ACTSC 231 ch08-eg-soln - 3.0153% 3.5463% 3.8616% 4.2984%...

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