You own a $1000 par zero-coupon bond that has 5 years of remaining maturity. You plan on

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You own a $1000 par zero-coupon bond that has 5 years of remaining maturity. You plan on selling the bond in one year and believe that the required yield next year will have the following probability distribution:

A.What is your expected price when you sell the bond?
B.What is the standard deviation?

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Financial Markets And Institutions

ISBN: 978-0132136839

7th Edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

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Question Posted: Apr 13, 2012 07:45 AM

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You own a $1000 par zero-coupon bond that has 5 years of remaining maturity. You plan on

Question:

Probability Required Yield % Probability 0.1 0.2 0.4 0.2 0.1 Required yield% 6.60% 0.1 0.2 0.4 0.2 0.1 6.75% 6.60% 6.75 7.00 7.20 7.45 7.20% 7.4590

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A What is your expected price when you sell the bond n 4 years after 1 year there would be 51 4 year...View the full answer

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