Assume zero-coupon yields on default-free securities are as summarized in the following table: ...
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Accounting
Assume zero-coupon yields on default-free securities are as summarized in the following table:
Maturity (years)
1
2
3
Zero-coupon YTM
4%
4,5%
4,75%
Consider a three-year, default-free security with annual coupon payments and a face value of $1000 that is issued at par. What is the coupon rate of this bond (EAR)? (hint: you can solve this question algebraically but also you can use goal seek in Excel)
A. 4.73%
B. 4.75%
C. 4.55%
D. 4.81%
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