Question
Suppose that an investor observes these prices and yields-to-maturity on zero-coupon government bonds: Maturity Price Yield-to-Maturity 1 years 97.50 2.235% 2 years 94.25 2.674% 3
Suppose that an investor observes these prices and yields-to-maturity on zero-coupon government bonds:
Maturity | Price | Yield-to-Maturity |
1 years | 97.50 | 2.235% |
2 years | 94.25 | 2.674% |
3 years | 91.75 | 2.782% |
The prices are per 100 of par value. The yields-to-maturity are stated on a semi-annual bond basis. An investor decide to buy the two-year zero and reinvest in another one-year zero in two years. Based on this decision, which of the following is the minimum yield-to-maturity the investor expects on one-year zeros two years from now?
2.707%
1.488%
3.880%
2.458%
2.998%
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