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Derive the probability distribution (i.e. fill up the table below) of the 1-year HPR on a 30-year U.S Treasury bond with an 8% coupon if
Derive the probability distribution (i.e. fill up the table below) of the 1-year HPR on a 30-year U.S Treasury bond with an 8% coupon if it is currently selling at par and the probability distribution of its price a year from now is as follows: Probability 0.2 Price HPR Economy Boom Normal Growth0.5 Recession YTM 11% 8% 7% 0.3 Assume that the entire 8% coupon is paid at the end of the year rather than every 6 months over a rincipal of $100. Compute the expected return and standard deviation of returns of the bond
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