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Use continuous compounding only. Q1: Find the price of a 3-year $100 bond that...

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Finance

Use continuous compounding only.

Q1: Find the price of a 3-year $100 bond that pays 4% coupon. Use the zero rates provided below.

Q2: Find the bond yield and par yield of the above bond.

Q3: You invest $400 in a 3 year zero coupon bond that pays 4.5% annual yield. Another zero coupon bond issued by the same issuer has 5 years maturity and pays 4.8% yield. How much will you earn from each bond at its maturities? What is the annual yield you are receiving between 3 years and 5 years?

Maturity Zero Rate
6 months 2%
1 year 2.3%
18 months 2.55%
2 years 2.75%
30 months 2.90%
3 years 3%

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