how did you do them?

A three-year option-free bond with an 8 percent annual coupon rate has a yield to maturity of 9 percent. Assume that the one- and two-year spot rates are 6.5 percent and 7.0 percent, respectively. The three-year spot rate is closest to: A. 6.4%. B. 8.1%. C. 9.0%. D. 9.2% If an investor’s required return is 12 percent, the value of a 10-year maturity zero-coupon bond with a maturity value of \$1,000 is closest to: A. \$312. B. \$688. C. \$1,000. D. \$1,312.

1. B ??? 2) A

1- bootstrapping? 2- 1000/[1.12^(10)]

D: You have to find the PV of the bond. 94.47 = (8/1.065) + (8/1.07^2) + (108/1+S^3 Solve for S and you get 9.2 A: Put into TVM and solve for PV (N = 20 and I/Y = 6)

soxboys as for #2 i think your method would produce too high a yield if you are splitting it into 20 periods it will have to be [(1.12)^0.5]

Now try splitting into N = 10 and I/Y = 12, then CPT PV–it’s none of the choices. I was under the assumption, unless it says ANNUAL, that we are to compute Zero’s as semi-annual…

you’re right soxboys, i was way off thanks for the info

SSS I tried the same, and then thought of using 20 periods instead after seeing the way off numbers

#1 is D FV = 100 PMT = 8 I/Y = 9 N=3 CPT PV… 97.4687 So… 97.4687 = 8/1.065 + 8/(1.07)^2 + 108/(1+X)^3 Simplify… 82.9695 = 108/(1+X)^3 Rearrange (1+X)^3 = 108/82.9695 = 1.3017 1.3017^(1/3) = 1.0919 = 9.2%

answer to Number 2 is A FV = 1000 PV = solve I = 6 N=20 PMT = 0 PV 311.8 Is the best way to do #1 is setting up the long way or deriving the a bond price and solving for the variable.