Currently the yield curve observed in the market

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Currently the yield curve observed in the market is as follows: y1 = 7%, y2 = 8%, and y3 = 9%. You are choosing between a two-year and three-year maturity bonds all paying annual coupons of 8%, once a year. You strongly believe that at the end of year the yield curve will become flat at 9%. Which bond should you buy if you plan to close out your position in one year right after receiving the coupon payment?

Reference no: EM131527396

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