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Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 1-year Treasury bond is 6 percent in Year 1 and the rate on a 1-year Treasury bond in Year 2 (that is, 1-year Treasury rate one year from now) is 10 percent, what rate of interest should you expect on a 2-year Treasury bond now?

The 30-year bonds of Gator Corporation are yielding 10 percent per year. Treasury bonds with the same maturity are yielding 6 percent per year. If the liquidity premium for Gator Corporation is 1 percent, what is the default risk premium (DRP) on the corporate bond?

Allison bought a bond when it was issued by ABC Corporation 20 years ago. The bond, which has a $1,000 face value and a coupon rate equal to 10 percent, matures in eight years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar risk investments is 8 percent, what should be the current market value (price) of the bond?

The current market price of Hope Corporation's 12 percent (coupon rate), 30-year bonds is $850. Interest is paid semiannually, and the par value is equal to $1,000. What is the yield to maturity (YTM) of the bond if the bond matures 30 years from today?

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