Suppose the current yield on a one-year, zero-coupon bond is 3%, while the yield on...
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Suppose the current yield on a one-year, zero-coupon bond is 3%, while the yield on a five-year, zero-coupon bond is 5%. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not rise above what level? (Assume $1 face value bond.) Hint: It is best not to round intermediate calculations-make sure to carry at least four decimal places in intermediate calculations. Note: Assume annual compounding. The yield should not rise above %. (Round to two decimal places.)
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