Annualized rate of return for the bond when held to maturity

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Reference no: EM132063636

Suppose prevailing spot rates are

S1 = .03 (one year)

S2 = .04 (two years)

S3 = .045 (three years)

S4 = .05 (four years)

a. Valuing the coupons at the appropriate spot rate, find the price of a 4 year bond for which F=C=50000 and whose annual coupons are 2400.

b. At the price of part a, what is the actual annualized rate of return for the bond when held to maturity?

Reference no: EM132063636

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