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QUESTION 3 Below are yields of risk-free zero-coupon $1,000-par-value bonds of various maturities. Maturity (years) 1 2 YTM 3.25% 3.50% 3 4 5 4.25% 4,40%

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QUESTION 3 Below are yields of risk-free zero-coupon $1,000-par-value bonds of various maturities. Maturity (years) 1 2 YTM 3.25% 3.50% 3 4 5 4.25% 4,40% a. Fill in the blank if market price of the three-year zero.coupon bond is $891.57 b. Construct yield curve using values from the table Suppose you would like to finance a project with equity. The project is expected to deliver cash flows during the next 5 years. Which of the risk- free rates from the table above you would use to estimate projects' cost of capital? Explain your choice

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