Question
An investor considers the purchase of a 3 year bond with a 7% coupon rate, with interest paid annually. Assuming the sequence of spot rates
An investor considers the purchase of a 3 year bond with a 7% coupon rate, with interest paid annually. Assuming the sequence of spot rates shown below answer the following questions.
A. The present value of the bond's final cash flow is:
B. The yield to maturity of this bond is
Time to maturity: Spot rate:
1 3%
2 5%
3 7%
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