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Suppose the current, zero-coupon, yield curve for risks free bonds is as follows. Maturity years 1 YTM...

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Finance

Suppose the current, zero-coupon, yield curve for risks free bondsis as follows.

Maturity years 1 YTM 5.00%, Maturity Years 2 YTM 5.50%,Maturity years 3 YTM 5.75%, Maturity Years 4 YTM 5.95%, Maturityyears 5 6.05%. Please be detailed with answers

A. what is the price per $ 100 face value of a 2 year, zerocoupon risk free bond? The price is (round to the nearestcent)
B. What is the price per $100.00 face value of a 4-year, zerocoupon, risk free bond? The price is (round to the nearestcent)
C. What is the risk free interest rate for a 5-year maturity?The risk free rate is (round to two decimal places)

Answer & Explanation Solved by verified expert
4.2 Ratings (799 Votes)
The concept is simple we can think of time value of money equation which is Future valuePresent value1interest rateNumber of years In case of bonds the future value is the amount paid at maturity The future value amount is the face value assuming the bond is held till maturity Interest rate in case of    See Answer
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Suppose the current, zero-coupon, yield curve for risks free bondsis as follows.Maturity years 1 YTM 5.00%, Maturity Years 2 YTM 5.50%,Maturity years 3 YTM 5.75%, Maturity Years 4 YTM 5.95%, Maturityyears 5 6.05%. Please be detailed with answersA. what is the price per $ 100 face value of a 2 year, zerocoupon risk free bond? The price is (round to the nearestcent)B. What is the price per $100.00 face value of a 4-year, zerocoupon, risk free bond? The price is (round to the nearestcent)C. What is the risk free interest rate for a 5-year maturity?The risk free rate is (round to two decimal places)

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