Based on the yield curve you derived from the strips bonds

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Suppose that a firm wishes to issue a one-year, 3.00% coupon bond that pays semiannually with a face value of $1,000 today. Based on the yield curve you derived from the STRIPS bonds above, ascertain whether this bond would sell at a premium, a discount, or at par. Assume for the sake of simplicity, that this firm faces no default risk such that it can borrow at Treasury rates given in the yield curve

Maturity: annualized spot rate

1 year 5%

2 years 5.5%

3 years 6%

4 years 6%

5 years ?

Question: Assuming the expectations theory of the term structure is correct, calculate the expected one-year interest rate three years from now (i.e.3f4)

Reference no: EM131025507

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