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a. Assuming that the expectations hypothesis is valid, compute the price of the four-year bond shown...

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Finance

a. Assuming that the expectations hypothesis isvalid, compute the price of the four-year bond shown below at theend of (i) the first year; (ii) the second year; (iii) the thirdyear; (iv) the fourth year. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)

Beginning of YearPrice of BondExpected Price
1$983.40
2$918.47
3$867.62
4$774.16

b. What is the rate of return of the bond inyears 1, 2, 3, and 4? Conclude that the expected return equals theforward rate for each year. (Do not round intermediatecalculations. Round your answers to 2 decimal places.) inpercentages

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a. Assuming that the expectations hypothesis isvalid, compute the price of the four-year bond shown below at theend of (i) the first year; (ii) the second year; (iii) the thirdyear; (iv) the fourth year. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)Beginning of YearPrice of BondExpected Price1$983.402$918.473$867.624$774.16b. What is the rate of return of the bond inyears 1, 2, 3, and 4? Conclude that the expected return equals theforward rate for each year. (Do not round intermediatecalculations. Round your answers to 2 decimal places.) inpercentages

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