(SOLVED) The following are the yields to maturity on Canada strip


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$15

The following are the yields to maturity on Canada strip bonds with various years to maturity.
Years to Maturity Yield to Maturity(%)
1………………………………………………………….1.26
2………………………………………………………….2.00
3…………………………………………………………2.47
4…………………………………………………………2.79
5…………………………………………………………3.02
a. Calculate the forward rate for each period.
b. Calculate the price today of the following Canada bonds:
i. 2-year $1,000 par value, 5% annual coupon, 2-year bond
ii. 5-year $1,000 par value, 5% annual coupon, 5-year bond
iii. 5-year $1,000 par value, 10% annual coupon, 5·year bond
c. Calculate the yields to maturity on each of the bonds in part (b).
d. Why is the yield to maturity on the 10% bond less than the yield on the 5%, 5·year bond?

Answer

$15