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Lets assume that you are interested in buying an (annual) coupon bond. This bond has five years to maturity, its coupon rate is 3.5%, its
Lets assume that you are interested in buying an (annual) coupon bond. This bond has five years to maturity, its coupon rate is 3.5%, its face value is $1,000, and its current price is $901. Moreover, you know the following information about the yield curve: y1 = 4.38%, y2 = 4.65%, y4 = 5.44%, and y5 = 5.90%. Under these circumstances, what is the yield of a zero-coupon bond with three years left to maturity?
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