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Calculate the one and two-year zero rate from the following information. Face value Current price Coupon Maturity 100 95 0 1 year 100 92 1.5 paid every six months; 3.0 total per year. 2 years

Respuesta :

hyderali230

Answer:

7.38%

Explanation:

Interest rate is the rate of difference between the current price and face value in a specified period of time in annual terms.

Face value     Current price     Coupon      Maturity

100                   95                         0                  1 year

100                   92                                              1.5 paid every six months

One year rate = ( 100 / 95 ) - 1 = 0.0526 = 5.26%

Now use following formula to calculate the Two years rate

=Rate(4,1.5,-92,100)x2 = 0.0738 = 7.38%

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