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Bond A is a discount bond with face value of $100 and maturity of 10 years. Bond B is a discount bond with face value
Bond A is a discount bond with face value of $100 and maturity of 10 years.
Bond B is a discount bond with face value of $100 and maturity of 2 years.
Suppose the yield to maturity is currently 4%.
Over the course of the year, prevailing yields are expected to change according to the table below:
Next year's yield | Probability |
3% | 0.33 |
4% | 0.34 |
5% | 0.33 |
Calculate the expected return of bond A.
Calculate the standard deviation of returns for bond A
Calculate the standard deviation of returns forbond B
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