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a) A security pays $100 in one year and $100 in two years. The one-year discount rate is 4%, the two-year is 4.92%. What is

a) A security pays $100 in one year and $100 in two years. The one-year discount rate is 4%, the two-year is 4.92%. What is its price?

b) What is the common discount rate i.e., the same discount rate is applied to both years such that it produces the price you calculate in a)? This is known as the securitys yield-to-maturity (or yield).

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