Suppose the yield on a one-year, zero-coupon bond is 5%. The forward rate for year 2 is

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Suppose the yield on a one-year, zero-coupon bond is 5%. The forward rate for year 2 is 4%, and the forward rate for year 3 is 3%. What is the yield to maturity of a zero-coupon bond that matures in threeyears?

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Corporate Finance

ISBN: 978-0133097894

3rd edition

Authors: Jonathan Berk and Peter DeMarzo

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Question Posted: Aug 06, 2014 07:23 AM

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Suppose the yield on a one-year, zero-coupon bond is 5%. The forward rate for year 2 is

Question:

Maturity (years) Zero-coupon YTM 4 5.0% 4.0% 5.5% 5.5% 4.5%

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We can invest for three years with risk by investing for one y...View the full answer

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