Quantitative Problems Chapter 4

1.You own a $1,000-par zero-coupon bond that has 5 years of remaining maturity. You plan on selling the bond in one year, and believe that the required yield next year will have the following probability distribution:

Probability		Required Yield
0.1		6.60%
0.2		6.75%
0.4		7.00%
0.2		7.20%
0.1		7.45%

(a)What is your expected price when you sell the bond?

(b)What is the standard deviation?