Show that the rate of return on the 3-year zero in Table 15.1 also will be 5%.

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Show that the rate of return on the 3-year zero in Table 15.1 also will be 5%. Hint: Next year, the bond will have a maturity of 2 years. Use the short rates derived in Figure 15.3 to compute the 2-year spot rate that will prevail a year from now.

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Investments

ISBN: 9780073530703

9th Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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