26. Measuring term structure (S3.3) The following table shows the prices of a sample of Narnian Treasury

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26. Measuring term structure (S3.3) The following table shows the prices of a sample of Narnian Treasury strips in December 2020. Each strip makes a single payment of $1,000 at maturity.

a. Calculate the annually compounded, spot interest rate for each year.

b. Is the term structure upward- or downward-sloping or flat?

c. Would you expect the yield on a coupon bond maturing in December 2025 to be higher or lower than the yield on the 2022 strip?

Maturity Price (%)

December 2022 90.703%

December 2023 85.892 December 2024 81.491 December 2025 77.243

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Principles Of Corporate Finance

ISBN: 9781264080946

14th Edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans

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Question Posted: Jul 31, 2024 02:01 AM

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26. Measuring term structure (S3.3) The following table shows the prices of a sample of Narnian Treasury

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Principles Of Corporate Finance

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