Analyze nestle csr initiative plan focuses on society issues
This is a CSR project, and choose to nestle as our company Note: Please give answer on mentioned words (must add intext citation) and required
Calculate the respective implied forward rates
Assignment Instructions
Assignment ID: FG133056740
Consider a semi-annual coupon bond. Its face value is $1,000, it bears a 6 percent coupon rate per year, and will mature in 2 years. (Note: You must show all the steps on how to obtain the values or your attempt will be penalized.)
Maturity | Spot Rates | Forward Rates |
0.5 | 0.9 | f1= f(0,0.5) |
1.0 | 1.3 | f2 = f(0.5,1) |
1.5 | 1.8 | f3 = f(1,1.5) |
2.0 | 2.3 | f4 = f(1.5, 2) |
1) Calculate the respective implied forward rates from the corresponding spot rates.
2) Calculate the bond price using the implied forward rates using the following equation.
3) Suppose that the CIR model generates the following binomial interest tree (forward rates) lattice. Calculate the bond price using the backward induction method.
t=1 | t=2 | t=3 | t=4 |
0.90 | 2.2 | 4.9 | 8.7 |
| 1.8 | 2.8 | 5.0 |
|
| 1.6 | 2.9 |
|
|
| 1.7 |
4) Check whether the bond price from 3) is the same as the bond price from 2).
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