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Assume the zero-coupon yields on default-free securities are as summarized in the following table:Maturity (years) 1 2 3 4 5, Zero-coupon YTM 5.00% 5.30% 5.50%
Assume the zero-coupon yields on default-free securities are as summarized in the following table:Maturity (years) 1 2 3 4 5, Zero-coupon YTM 5.00% 5.30% 5.50% 5.70% 5.80% Consider a five-year, default-free bond with annual coupons of 6% and a face value of $1,000. a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. b. What is the yield to maturity on this bond? c. If the yield to maturity on this bond increased to 6.20%, what would the new price be?
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