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  3. b) consider five bonds with the following features

b) Consider five bonds with the following features at date t=0: Using the bootstrapping...

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Finance

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

image

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

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

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

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