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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Ef 408.

Transcribed Image Text:Prices of zero-coupon bonds reveal the following patter of forward rates
44
1
In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $25 with par value
$1,000
a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places)
b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal
places)
c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate
calculations. Round your answer to 2 decimal places)
the expected rate of return on the coupon
d. If you forecast that the yield curve in 1 year will be flat at 80%, what is your forecast
bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Yield to matury
Realized compound yield
d. Holding period return
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