# Derivatives: interest rate questions

Problem 3)

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Using the four “zero rates” from the Example slide, use Goal Seek to find the Par Yield of a two year semi-annual bond. Hint: Discount each cash flow using the appropriate zero rate, calculate the price, and then find the coupon that sets this price equal to \$100 using Goal Seek.

Problem 4)

Consider another two year semi-annual bond with a coupon of 5% (annualized) and a price of \$105. You are given that the .5 year zero rate is 2.0%, 1 year zero rate is 2.1% and 1.5 year zero rate is 2.2%. Use Goal Seek to “bootstrap” to find the 2-year zero rate.

problem 5 and 6 in the word document.

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