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Suppose prices of zero-coupon bond with $100 face value and various maturities are as follows Horizon, T. 1 Quarter 4 Months Price 98.34 97.25 90.40
Suppose prices of zero-coupon bond with $100 face value and various maturities are as follows Horizon, T. 1 Quarter 4 Months Price 98.34 97.25 90.40 49.38 2 years 10 years (a) Calculate the risk-free rate of returns for the above four bonds. (b) Calculate the effective annual rates for the above four bonds. Which bond has the highest EAR? (c) Calculate the annualized percentage rate for the above four bonds, if appropriate (Hint: Not all four bonds are appropriate to calculate the APR). If not appropriate, please explain the reason
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