Question
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value): Maturity (years) 1 2 3 4 5
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value):
Maturity (years) | 1 | 2 | 3 | 4 | 5 |
Price (per $100 face value) | 95.84 | $91.53 | $87.01 | $82.28 | $77.26 |
a. Compute the yield to maturity for each bond.
b. Plot the zero-coupon yield curve (for the first five years).
c. Is the yield curve upward sloping, downward sloping, or flat?
a. Compute the yield to maturity for each bond.
The yield on the 1-year bond is
___%.
(Round to two decimal places.)The yield on the 2-year bond is
____%.
(Round to two decimal places.)The yield on the 3-year bond is
_%.
(Round to two decimal places.)The yield on the 4-year bond is
%.
(Round to two decimal places.)The yield on the 5-year bond is
%.
(Round to two decimal places.)
c. Is the yield curve upward sloping, downward sloping, or flat?(Select from the drop-down menu.)
The yield curve is
upward sloping.
flat.
downward sloping.
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