Determine term structure of interest rates
Hi Appreciate your help with this question.
You observe the following information on U.K. default-free government bonds. All bonds pay annual coupons and have a par value of £100. Price Maturity Coupon Rate Bond A £96.266 2 years 2% Bond B £103.885 2 years 6% Using Bond A and Bond B what is the current term structure of interest rates?
So I double checked, you can't really know this because the bonds are of the same maturity. I would guess this is a trick question.
Thanks for your reply. I had the same thinking. However, the YTM for first bond is 3.98% and for the second bond is 3.94%. Does this give us enough information to calculate the term structure of interest rates?
Again, I don't think so because they still have the same time to maturity. There isn't too much information to build a graph out of because we still don't know when they were issued.
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