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The table below displays yields to maturity (YTM) of zero-coupon, risk-free securities: Maturity 1 year 2 years 3 years 4 years 5 years YTM 4.60%
The table below displays yields to maturity (YTM) of zero-coupon, risk-free securities:
Maturity | 1 year | 2 years | 3 years | 4 years | 5 years |
YTM | 4.60% | 4.35% | 4.40% | 4.70% | 5.01% |
a)value a 3-year default-free zero-coupon bond with a $2000 face value.
b)if the yield to maturity of the bond in a) does not change, what is its price two years from now?
c)show clearly which bond has the higher interest rate risk: the bond in a) or a 5-year default-free bond with a $2000 face value, a 10% annual coupon and yield to maturity of 5.00%?
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