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You have estimated spot rates as follows: r1= 5.60%, r2= 6.00%, r3= 6.30%, r4= 6.50%, r5=...

You have estimated spot rates as follows:

r1= 5.60%, r2= 6.00%, r3= 6.30%, r4= 6.50%, r5= 6.60%.

a. What are the discount factors for each date (that is, the present value of $1 paid in year t)?

b. Calculate the PV of the following $1,000 bonds assuming an annual coupon and maturity of : (i) 5.6%, two-year bond; (ii) 5.6%, five-year bond; and (iii) 10.6%, five-year bond.

c. What should be the yield to maturity on a five-year zero-coupon bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

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Expert Solution

jeff jeffy answered 2 years ago
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