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Assume 1-year LIBOR is 1.00%, and a risky bond has a rate of LIBOR 5% [This means that the risk-free bond has a rate of

Assume 1-year LIBOR is 1.00%, and a risky bond has a rate of LIBOR 5% [This means that the risk-free bond has a rate of LIBOR (or 1%)] Assume interest is paid/received quarterly. Each bond is priced a...

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