The Six-Month Zero Rate Is 8% with Semi-Annual Compounding

question 7

Short Answer

The six-month zero rate is 8% with semi-annual compounding. The price of a one-year bond that provides a coupon of 6% per annum semi-annually is 97. What is the one-year continuously compounded zero rate? Answer as a per cent with two decimal places. _ _ _ _ _ _

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Definitions:

Logarithms

The power to which a base, typically 10 or \(e\), must be raised to produce a given number.

Expand

To rewrite an expression in an extended form, often used to simplify expressions by removing parentheses.

Properties

Characteristics or rules that define how operations are performed on numbers and variables, including distributive, associative, and commutative properties.

Logarithms

Mathematical functions that determine the exponent or power to which a base number is raised to obtain a certain value, often written as \(\log_b(x)\).