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Assume that the Pure Expectations Theory of the Term Structure is correct and that the expected one year rates for each of the next three
Assume that the Pure Expectations Theory of the Term Structure is correct and that the expected one year rates for each of the next three years are Year 1=5%, Year 2=6%, and Year 3=7%. Assume now that a corporate bond has a par value of $1,000,3 years until it matures, and pays $50 in interest on an annual basis each year (you should now be able to calculate the price of this bond - see tabli below). What is the yield to maturity for this bond? 5.96% 5.86% 6.06% 6.26% 6.16%
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