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Twelve-month interest rates for the next four years

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Reference no: EM132525224

Twelve-month interest rates for the next four years are expected to be 5%,6%,6.8% and 7.4% respectively. Calculate the yield to maturity on:

1)a pure discount four-year bond, and

2)a four-year 8% annual coupon bond.

Explain why there is a difference.

Reference no: EM132525224

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