Question
Suppose you are interested in purchasing a two-year risk-free bond with a face value of $100 and an annual coupon rate of 5%? (a) What
Suppose you are interested in purchasing a two-year risk-free bond with a face value of $100 and an
annual coupon rate of 5%?
(a) What is the today's price of the bond?
(b) What is the yield to maturity for the bond? Round your answer to six digits after the point. (Hint: Set up a quadratic equation)
(c) Suppose that the 2-year spot rate has increased. How will it affect the today's price of the bond and its yield to maturity?
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
8th edition
013342362X, 978-0133423624
