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7 In Figure 6. Z we saw a plot of the yield curve on stripped Treasury bonds and pointed out that bonds of different maturities

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7 In Figure 6. Z we saw a plot of the yield curve on stripped Treasury bonds and pointed out that bonds of different maturities may sell at different yields to maturity. In principle, when we are valuing a stream of cash flows, each cash flow should be discounted by the yield appropriate to its particular maturity. Suppose the yield curve on (zero-coupon) Treasury strips is as follows: 10 points Years to Maturity 1 2 3-5 6-10 Yield to Maturity 4.08 5.0 5.5 6.0 eBook You wish to value a 10-year bond with a coupon rate of 10% paid annually. Print a. Complete the below table to value each of the bond's annual cash flows using this table of yields. Add up the present values of the bond's 10 cash flows to obtain the bond price. (Do not round intermediate calculations. Enter your "YTM" answers as a percent rounded to 1 decimal place and round "PV of Cash Flow" answers to 8 decimal places.) References Year Cash Flow from Bond PV of Cash Flow 1 2. 3 4 5 6 YTM % % % % % % % % % % 7 8 9 10

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