Question
The yield to maturity on 1 year zero coupon bonds is currently 8%, the YTM on 2 year zeros is 9%. The Treasury plans to
The yield to maturity on 1 year zero coupon bonds is currently 8%, the YTM on 2 year zeros is 9%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 10.5%. The face value of the bond is 100. At what price will the bond sell? That answer is 101.74 and correct but I need help to find the yield to maturity on the bond. ( figured 9.504 but it is incorrect) Secondly Iif the expectations theory of the yield curve is correct, what is the market expectations of the proce that bond will sell for next year? And lastly recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 2%(Please round answers to 2 decimal places)
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