a. What is the formula for the value of a two-year, 5% bond in terms of spot
Question:
a. What is the formula for the value of a two-year, 5% bond in terms of spot rates?
b. What is the formula for its value in terms of yield to maturity?
c. If the two-year spot rate is higher than the one-year rate, is the yield to maturity greater or less than the two-year spot rate?
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