Suppose you are risk-neutral and don't care about liquidity. If the 3-year zero coupon bond...
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Suppose you are risk-neutral and don't care about liquidity. If the 3-year zero coupon bond YTM is 3% and the 4-year zero coupon bond YTM is 2.5%, and you expect the 1-year rate between years 3 and 4 will be 2.5%, then
Question 2 options:
you should buy the 3-year zero
you should buy the 4-year zero
you would be indifferent between the two
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