Answer the Following Questions That Relate to Bonds

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.