1) The YTM of a risk-free zero-coupon bond maturing two years from now is 2.1%...
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1) The YTM of a risk-free zero-coupon bond maturing two years from now is 2.1% and the YTM of a risk-free zero-coupon bond maturing three years from now is 2.4%. Find the value of a risk-free security that has cash flows of $10 million in year 2 and $30 million in year 3. Round the answer to two digits after decimal (in $ million).
2)
The risk-free bond has face value of $1000, matures in 3 years, and has an annual coupon rate of 4% (paid twice a year). The annualized YTM of the bond is 6% (i.e., the semi-annual YTM is 3%).
a. What are the cash flows of the bond in $?
b. What is the price of the bond justified by its cash flows
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