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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Prices of zero-coupon bonds reveal the following pattern of forward rates:
Year | Forward Rate |
1 | 5% |
2 | 7 Â Â |
3 | 8 Â Â |
 |
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In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $45 with par value $1,000. |
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a. |
What is the price of the coupon bond?(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
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  Price | $   |
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b. |
What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
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  Yield to maturity | %  |
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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. Omit the "%" sign in your response.) |
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  Realized compound yield | %  |
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d. |
If you forecast that the yield curve in 1 year will be flat at 8.0%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
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  Holding period return | %  |
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