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You find the following par yield curve reported in the Wall Street Journal: Maturity---------Par yields 0. 5 -----------1% p. a. 1--------------2.5% p. a. 1.5------------3.5% p.
You find the following par yield curve reported in the Wall Street Journal:
Maturity---------Par yields
0. 5 -----------1% p. a.
1--------------2.5% p. a.
1.5------------3.5% p. a.
2-------------4.3% p. a.
All yields are per annum semiannual compounding.
- Compute the corresponding zero yields from the above information
b) Price a 2-yr T-note that pays 5% p.a. coupons
c) If the expectation hypothesis is true, what is your best guess regarding the 1-yr zero yield in a year's time?
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