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Consider two 5-year bonds: one has an 5% coupon rate and sells for $98; the other...

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Finance

Consider two 5-year bonds: one has an 5% coupon rate and sellsfor $98; the other has an 8% coupon rate and sells for $109. Whatis the price of a 5-year zero coupon bond? (Assume that coupons arepaid annually, and the face values of all the bonds are $100.)

(Keep your answer to 2 decimal places, e.g. xx.12.)

Answer & Explanation Solved by verified expert
4.3 Ratings (724 Votes)
Bond 1 Par Value 100 Coupon Rate 5 and Coupon Frequency Annual Tenure 5 years and price 98 Annual Coupon 005 x 100 5 Let the yield to maturity be    See Answer
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