Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate 1 6$ 2 8 3 9 In addition to the zero-coupon...

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Prices of zero-coupon bonds reveal the following pattern offorward rates:
Year Forward Rate
1 6$
2 8
3 9
In addition to the zero-coupon bond, investors also may purchasea 3-year bond making annual payments of $50 with par value$1,000.
a. What is the price of the coupon bond?(Do not round intermediate calculations. Round your answerto 2 decimal places.)
Price=
b. What is the yield to maturity of the couponbond? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)
Yield to maturity= %
c. Under the expectations hypothesis, what isthe expected realized compound yield of the coupon bond?(Do not round intermediate calculations. Round your answerto 2 decimal places.)
Realized compound yield= %
d. If you forecast that the yield curve in 1year will be flat at 9.0%, what is your forecast for the expectedrate of return on the coupon bond for the 1-year holding period?(Do not round intermediate calculations. Round your answerto 2 decimal places.)
Holding period return= %

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3.6 Ratings (520 Votes)

As per the question Year Forward Rate 1 6 2 8 3 9 In addition to the zerocoupon bond investors also may purchase a 3year bond making annual payments of 50 with par value 1000 A What See Answer

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