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Consider afive-year, default-free bond with annual coupons of 7 % 7% and a face value of $ 1 comma 000 $1,000 and assumezero-coupon yields ondefault-free
Consider afive-year, default-free bond with annual coupons of 7 %
7% and a face value of $ 1 comma 000
$1,000 and assumezero-coupon yields ondefault-free securities are as summarized in the followingtable:
Maturity
1 year
2 years
3 years
4 years
5 years
Zero-Coupon Yields
6.00
6.00%
6.30
6.30%
6.50
6.50%
6.70
6.70%
6.80
6.80%
a. What is the yield to maturity on thisbond?
b. If the yield to maturity on this bond increased to 7.20 %
7.20%, what would the new pricebe?
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