Question

In: Finance

The current​ zero-coupon yield curve for​ risk-free bonds is as​ follows: Maturity ​(years) 1 2 3...

The current​ zero-coupon yield curve for​ risk-free bonds is as​ follows:

Maturity ​(years)

1

2

3

4

5

YTM

4.99%

5.55%

5.79%

5.96%

6.09%

What is the price per $100 face value of a​ two-year, zero-coupon,​ risk-free bond?

Solutions

Expert Solution

r1 = 4.99%

r2 = 5.55%

FV = 100

Price = FV/(1 + r2) * 1/(1 + r1)

Price = 100/(1 + 0.0555) * 1/(1 + 0.0499)

Price = 94.7418285173 * 0.952471664

Price = $90.2389070583


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