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  3. a) consider five bonds with the following features

A) Consider five bonds with the following features at date t=0: ...

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Finance

A) Consider five bonds with the following features at date t=0:

Annual Coupon Maturity Price
Bond 1 6 1 year 103
Bond 2 5 2 years 102
Bond 3 4 3 years 100
Bond 4 6 4 years 104

Using the bootstrapping method, compute the yearly spot curve by calculating the spot rates for all four maturities (use continuous compounding).

B) Calculate all possible forwards rates starting two years from now using the appropriate spot rates from (A) (using the continuous compounding formula).

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