Answer the Following Questions That Relate to Bonds

question 38

Essay

Answer the following questions that relate to bonds.
A 2-year zero-coupon bond is selling for $890.00.What is the yield to maturity of this bond
The price of a 1-year zero-coupon bond is $931.97.What is the yield to maturity of this bond
Calculate the forward rate for the second year.
How can you construct a synthetic one-year forward loan (you are agreeing now to loan in one year)
State the strategy and show the corresponding cash flows.Assume that you can purchase and sell fractional portions of bonds.Show all calculations and discuss the meaning of the transactions.

---

Definitions:

CCA Class

A categorization under Canadian tax law that groups depreciable assets affecting the rate at which businesses can claim capital cost allowance for tax purposes.

Tourism Revenue

The income generated from tourists, including spending on accommodations, food, transport, and entertainment in the destination.

CCA Tax Shield

A tax deduction that allows businesses to depreciate the cost of tangible property or assets over time, reducing taxable income.