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Suppose you observe the following zero-coupon bond prices per $1 of maturity payment: 0.94625 (1-year), 0.88966 (2-year), 0.83300 (3-year). Compute the 3-year effective annual zero-coupon bond yield.

Answers:

a. 6.28% Correct

b. 20.05%

c. 6.80%

d. 13.60%

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