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You observe the following term structure: Effective Annual YTM 1 - year zero - coupon bond 6 . 7 % 2 - year zero -
You observe the following term structure:
Effective Annual YTM
year zerocoupon bond
year zerocoupon bond
year zerocoupon bond
year zerocoupon bond
Required:
If you believe that the term structure next year will be the same as todays calculate the return on i the year zero and ii the year zero.
Which bond provides a greater expected year return?
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