Question
The current yield curve for default-free zero-coupon bonds is as follows: Maturity (years) YTM 1 11.0 % 2 12.0 3 13.0 What are the implied
The current yield curve for default-free zero-coupon bonds is as follows:
Maturity (years) | YTM | ||||||
1 | 11.0 | % | |||||
2 | 12.0 | ||||||
3 | 13.0 | ||||||
What are the implied one-year forward rates? maturity (years) YTM forward rate 1 11.00% 2 12.00% ? 3 13.00% ?
c-1. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected total rate of return
If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected total rate of return |
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