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The zero-coupon bonds with par value of $1000 have the following term structure: Maturity YTM (%) 10% 11% 12% i. What are the implied 1-year
The zero-coupon bonds with par value of $1000 have the following term structure: Maturity YTM (%) 10% 11% 12% i. What are the implied 1-year forward rates? (5 marks) ii. Assume that the pure expectations hypothesis of the term structure is correct. If market expectations are accurate, what will be the pure yield curve next year? (5 marks) iii. What should be the current price of a 2-year maturity bond with a 12% coupon rate paid annually? If you purchased it at that price, what would your total expected rate of return be over the next year
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