Purchase three year zero coupon bond

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Reference no: EM131887523

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

Maturity(years)YTM

1 10.0%

2 11.0%

3 12.0%

3. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? What if you purchase a three year zero coupon bond? (Hint: compute the current and expected future prices.)

Reference no: EM131887523

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