24Lecture24

625 2625 2625 2625 102625 price 1013984 1089844

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Unformatted text preview: 3.125 3.125 3.125 103.125 8/15/03 2.625 2.625 2.625 2.625 102.625 Price 101.3984 108.9844 102.1563 102.5664 100.8438 DFi × C /2 + DFN × (100 + C /2) (a) 101.3984 = DF1 103.9375 ⇒ DF1 = 101.3984 = 0.97557 103.9375 (b) 108.9844 = DF1 7.125 + DF2 107.125 ⇒ DF2 = 108.9844 − DF1 7.125 = 0.95247 107.125 Fixed Income III: R. J. Hawkins Econ 136: Financial Economics 10/ 24 DF 0.97557 0.95247 0.93045 0.90796 0.88630 The Term Structure of Interest Rates From discount factors we get spot rates. Tenor 0.5 1.0 1.5 2.0 2.5 DFi = Discount Factor 0.97557 0.95247 0.93045 0.90796 0.88630 Spot Rate (%) 5.008 4.929 4.864 4.886 4.887 1 −1/i −1 ⇒ ri = 2 DFi (1 + ri /2)i (a) r1 = 2 1 −1 DFi =2 1 −1 0.97557 1 =2 (b) r2 = 2 1 −1 DFi 2 Fixed Income III: R. J. Hawkins 1 1 0.95247 2 =2 1 1/i DFi −1 = 0.05008 −1 = 0.04929 Econ 136: Financial Economics 11/ 24 The Term Structure of Interest Rates From spot rates we get forward rates. Tenor 0.5 1.0 1.5 2.0 2.5 DFi = Discount Factor 0.97557 0.95247 0.93045...
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This note was uploaded on 01/23/2014 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at Berkeley.

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