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Problem 15-14 You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.00 2-year zero-coupon bond 8.1 3-year zero-coupon bond 8.2 4-year zero-coupon
Problem 15-14 You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.00 2-year zero-coupon bond 8.1 3-year zero-coupon bond 8.2 4-year zero-coupon bond 8.3 a. If you believe that the term structure next year will be the same as today's, calculate the return on the 1-year zero and the 4 year zero. (Do not round intermediate calculations. Round your answers to 1 decimal place.) ces One year return on 1-year bond One year return on 4-year bonds % b. Which bond provides a greater expected 1-year return? O 1-year zero-coupon bond O 4-year zero-coupon bond
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