What is your expected price when you sell the bond

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Reference no: EM131826504

You own a zero-coupon bond with a face value of $1000 and five years until maturity.

You plan to sell the bond in one year (when the bond will have four years until maturity).

You believe that, at the time you will sell the bond, the yield to maturity that potential bond buyers will require will have the following probability distribution:

Probability Yield

0.1 2.0%

0.2 2.5%

0.4 2.8%

0.2 3.0%

0.1 3.5%

a. What is your expected price when you sell the bond?

b. What is the standard deviation of your expected price?

Reference no: EM131826504

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