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An investor bought a 3-year zero-coupon bond in Year 0, when the 1-year zero rate was 4.1% pa, the 2-year zero rate was 5.2% pa
An investor bought a 3-year zero-coupon bond in Year 0, when the 1-year zero rate was 4.1% pa, the 2-year zero rate was 5.2% pa and the 3-year zero rate was 5.7% pa. The investor sold the bond two years later. Zero-rate curves for various dates are shown in the table below.
Term (years) | Year 0 | Year 1 | Year 2 | Year 3 |
1 | 4.1% | 7.2% | 10.0% | 10.4% |
2 | 5.2% | 8.2% | 10.1% | 10.4% |
3 | 5.7% | 8.8% | 10.2% | 10.4% |
What is the investor's holding period rate of return (pa)?
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