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Consider a 4% coupon, 3-year bond (remember it pays every 6 months). If the par value is $100, and the spot rates, i.e. the relevant
Consider a 4% coupon, 3-year bond (remember it pays every 6 months). If the par value is $100, and the "spot" rates, i.e. the relevant discount rates are
r.5 = .0042
r1 = .0058
r1.5 = .0065
r2 = .0076
r2.5 = .0081
r3 = .0087
a. What is the price of this bond?
b. What is the YTM of this bond?
c. Is the YTM above, below, or equal to the coupon rate? Does this make sense, given your answer in part (a)?
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