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Default-free zero-coupon bonds

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Reference no: EM133068678

Assume the current yield curve for default-free zero-coupon bonds is as follows:

Maturity (Years)

YTM (%)

1

5

2

6

3

7

4

8

Starting from year 4, the yield curve is flat at 8% for all the longer (longer than 4 years) maturities.

Based on the above yield curve, calculate & Answer

i). If you invest $100 today, what is the final wealth in the end of year 1, year 2, and year 3, respectively? 

ii) What is the implied one-year forward rate starting at the beginning of year 1, year 2, and year 3, respectively? 

Reference no: EM133068678

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