Business
Business, 28.01.2020 21:51, romeroalexis817

We see the following yield curve for discount, or zero-coupon, bonds.

maturity yield to maturity
1 year 6%
2 years 7%
3 years 8%

(a) if the fair price for a four-year annuity paying $100 per year is $334.57, what is the yield to maturity on a four-year zero-coupon bond?
(b) suppose that you wish to lock in a loan in year 2 to be repaid in year 3 (cash received in year 2 and interest plus principal returned in year 3). the amount of the loan is $20 million. what pattern of discount bond holdings could you use to construct this loan now?

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We see the following yield curve for discount, or zero-coupon, bonds.

maturity yield to...

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