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In the financial market thereare three bonds, all with face value of 1000. Bond A is a zero-coupon bond that expires in one year. The
In the financial market thereare three bonds, all with face value of 1000.
Bond A is a zero-coupon bond that expires in one year. The price of bond A is 980.
Bond B is a coupon bond that expires in two years. The coupon rate is 8% per year with annual payment. The price of bond B is 1110.
Bond C is a zero-coupon bond that expires in two years.
(a)What is the one-year interest rate? What is the 2-year interest rate? In both cases, please calculate the annualized interest rate, annually compounded.
(b)What is the price of Bond C?
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