Suppose theâ current, zero-coupon, yield curve forâ risk-free bonds is asâ follows:
Maturityâ (years)
1
2
3
4
5
Yield to Maturity
4.51
4.84
5.00â%
5.12â%
5.37â%
a. What is the price per $100 face value of a 3â-year, zero-coupon risk-freeâ bond?
b. What is the price per $100 face value of a 5â-year, zero-coupon, risk-freeâ bond?
c. What is theâ risk-free interest rate for a 3â-year maturity?
Noteâ: Assume annual compounding.
Suppose theâ current, zero-coupon, yield curve forâ risk-free bonds is asâ follows:
| Maturityâ (years) | 1 | 2 | 3 | 4 | 5 |
| Yield to Maturity | 4.51 | 4.84 | 5.00â% | 5.12â% | 5.37â% |
a. What is the price per $100 face value of a 3â-year, zero-coupon risk-freeâ bond?
b. What is the price per $100 face value of a 5â-year, zero-coupon, risk-freeâ bond?
c. What is theâ risk-free interest rate for a 3â-year maturity?
Noteâ: Assume annual compounding.
Related questions
The following table summarizes prices of variousâ default-free zero-coupon bondsâ ($100 faceâ value):
| Maturityâ (years) | 1 | 2 | 3 | 4 | 5 |
| Priceâ (per $100 faceâ value) | â$95.56 | â$91.05 | â$86.46 | â$81.68 | â$76.57 |
a. Compute the yield to maturity for each bond.
b. Plot theâ zero-coupon yield curveâ (for the first fiveâ years).
c. Is the yield curve upwardâ sloping, downwardâ sloping, orâ flat?
Noteâ: Assume annual compounding.
Assume theâ zero-coupon yields onâ default-free securities are as summarized in the followingâ table:
| Maturity | 1 year | 2 years | 3 years | 4 years | 5 years |
| âZero-Coupon Yields | 3.53.5â% | 4.04.0â% | 4.34.3â% | 4.54.5â% | 4.94.9â% |
What is the price today of aâ two-year, default-free security with a face value of $1,000 and an annual coupon rate of 3%â?
Does this bond trade at aâ discount, atâ par, or at aâ premium?ââ
Noteâ:
Assume annual compounding.
What is the price today of aâ two-year, default-free security with a face value of $1,000
and an annual coupon rate of 3%â?
The price is $. (Round to the nearestâ cent.)
