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The following table summarizes prices of various? default-free zero-coupon bonds? ($100 face? value): Maturity? (years) 1 2 3 4 5 Price? (per $100 face? value)
The following table summarizes prices of various? default-free zero-coupon bonds? ($100 face? value):
Maturity? (years) | 1 | 2 | 3 | 4 | 5 |
Price? (per $100 face? value) | ?$96.0396.03 | ?$91.7191.71 | ?$87.0487.04 | ?$82.3382.33 | ?$77.1977.19 |
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?
Note?:
Assume annual compounding.
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