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What is the one-year forward rate

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Reference no: EM132828481

The yield on one-year zero-coupon bonds is 4% and the yield on two-year zero-coupon bonds is 6%.

a. What is the one-year forward rate (the rate you can lock in today to borrow or lend for a year starting one year from now)?

b. According to the Expectations Hypothesis, what do investors expect the yield on one-year zero-coupon bonds to be next year?

c. What is the price of a two-year annual-pay 20% coupon bond with face value $100?

Reference no: EM132828481

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