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What should the yield to maturity on the bond be

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Reference no: EM133096489

Question - Below is a list of prices for zero-coupon bonds of various maturities.

Maturity (Years)

Price of $1000 Par Bond (Zero-Coupon)

1

$945.80

2

877.23

3

803.34

a. A 4.8% coupon $1000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be?

b. lf at the end of the first year the yield curve flattens out at 8.4%, what will be the 1-year holding-period return on the coupon bond?

Reference no: EM133096489

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