Transcribed Image Text
Hey. I am having trouble with a finance question:-----------------------------------------------------------------------------------------------------------------------------------------Consider two bonds. The first is a 6% coupon bond with six yearsto maturity, and a yield to maturity of 4.5% annual rate,compounded semi-annually. The second bond is a 2% coupon bond withsix years to maturity and a yield to maturity of 5.0%, annual rate,compounded semi-annually.Given the data for the first two bonds, now consider a thirdbond: a zero coupon bond with six years to maturity. Calculate theprice per $100 of face value of the zero coupon bond. Calculate theyield to maturity for the zero coupon bond. (Express the yield asannual rate, compounded semi-annually).HINT: Use the Value Additivity principle to answer. Create asynthetic zerocoupon bond, that is, a portfolio of the 6% couponbond and the 2% coupon bond that has the same cash flows as a6-year, zero coupon bond.