What is the 1.5 year zero rate (also known as "spot rate") give that the...
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What is the 1.5 year zero rate (also known as "spot rate") give that the information for the following .5 year, 1 year, and 1.5 year bonds:
NOTE: The .5 & 1 year bonds are zero-coupon. The 1.5 year bond has a $5.00 coupon which is paid semi-annually (in 2 increments of $2.50, each six-months apart).
Time to Maturity (in years)
Coupon ($)
Price
Zero Rate
0.5
$ -
$99.50
1
$ -
$99.00
1.5
$5.00
$102.00
HINT: You must solve recursively as shown in the lecture (first, you have to solve for the .5 year zero rate, then the 1 year zero rate, then the 1.5 year zero rate)
Group of answer choices
1.38%
2.28%
3.65%
4.15%
5.17%
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