Assume the following spot rates: a) Using the spot rates above, calculate the 2-year forward...
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Assume the following spot rates: a) Using the spot rates above, calculate the 2-year forward rate 2-year from today. Your calculation is based on which theory? Explain that theory briefly. (2+1 = 3 marks) b) Using the spot rates above, value a 2-year treasury bond with a $1000 face value and 7.5% semi-annual coupon. (3 marks) c) Using the value from part (b), calculate the YTM of the bond. (2 marks) d) Let's assume a hypothetical price of this bond which is $998. Using this hypothetical price, compute the Price Value of a Basis Point (PVBP) of this bond. (2 marks) Assume the following spot rates: a) Using the spot rates above, calculate the 2-year forward rate 2-year from today. Your calculation is based on which theory? Explain that theory briefly. (2+1 = 3 marks) b) Using the spot rates above, value a 2-year treasury bond with a $1000 face value and 7.5% semi-annual coupon. (3 marks) c) Using the value from part (b), calculate the YTM of the bond. (2 marks) d) Let's assume a hypothetical price of this bond which is $998. Using this hypothetical price, compute the Price Value of a Basis Point (PVBP) of this bond. (2 marks)
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