The six-month zero rate is 8% per annum with semiannual compounding. The price of a one-year bond that provides a coupon of 6% per annum semiannually is 97 . What is the one-year continuously compounded zero rate?
A. 8.02%
B. 8.52%
C. 9.02%
D. 9.52%
C
If the rate is R we must have
or
so that R = ln(1/0.9137) = 0.0902 or 9.02%.
Business
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