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Mathematics, 09.04.2020 18:50 jusicca1109

A model of interest rates gives the n-year spot rate of interest as:
Y_n=1/8(1 +e^-0.25n)
Assuming this is correct and that the term structure of interest rates does not change in the future, calculate:
(a) The price per £100 nominal of an 8-year zero coupon bond purchased now. (2 marks)
(b) The price per £100 nominal of an 8-year zero coupon bond purchased in 4 years' time. (3 marks)
(c) The one-year forward rate at time 4 years. (3 marks)
(d) The 3-year par yield. (4 marks)
(Total 12 marks)

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A model of interest rates gives the n-year spot rate of interest as:
Y_n=1/8(1 +e^-0.25n)
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