Question
Suppose the current yield on a one-year zero-coupon bond is 2 %, while the yield on a five-year zero-coupon bond is 6 %. Neither bond
Suppose the current yield on a one-year zero-coupon bond is 2 %, while the yield on a five-year zero-coupon bond is 6 %. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not rise above what level? (Assume $ 1 face value bond.) Hint: It is best not to round intermediate calculations - make sure to carry at least four decimal places in intermediate calculations.Note: Assume annual compounding. Question content area bottom
Part 1
The yield should not rise above enter your response here %.
(Round to two decimal places.)
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