Question
(a) Suppose you purchase a 3-year zero-coupon bond with face value of $1000 and a price of $850. What is the bond's yield? If you
(a) Suppose you purchase a 3-year zero-coupon bond with face value of $1000 and a price of $850. What is the bond's yield? If you hold the bond to maturity, what will be your effective annual return? (b) Now suppose you purchase a 3-year bond with face value of $1000, a 7% annual coupon, and a price of $975. Is the yield of this bond to maturity greater or less than for the bond above?
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International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
