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These are not the right answers: i am stuck on how to answer the question. You have $1,000 to invest over an investment horizon of
These are not the right answers: i am stuck on how to answer the question.
You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy () a sequence of three one-year bonds; (ii) a three-year bond; or (ii) a two-year bond followed by a one-year bond. The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 5.5 percent, 5 percent, and 4.7 percent respectively. You expect that one-year interest rates will be 4 percent next year and 4 percent the year after that. Assuming annual compounding compute the return on each of the three investments nstructions: Enter your responses rounded to the nearest two decimal places. Expected return for (i)- 55% Expected return for (i5.07% Expected return for (iii)-L533%Step by Step Solution
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