4. Suppose the current zero-coupon yield curve for risk-free bonds is as follows:Maturity(years)YTM1343.25%3.50%3.90%4.25%4.40%The price per $100 face value of a three-year, zero-coupon, risk-free bond is closest to:A) $93.80B) $90.06C) $89.16D) $86.39

Zero-coupon bond can be defined as the type of bond which pays lumpsum amount at the end of the…

4. Suppose the current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 1 3 4 5 3.25% 3.50% 3.90% 4.25% 4.40% The price per $100 face value of a three-year, zero-coupon, risk-free bond is closest to: A) $93.80 B) $90.06 C) $89.16 D) $86.39

4. Suppose the current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 1 3 4 5 3.25% 3.50% 3.90% 4.25% 4.40% The price per $100 face value of a three-year, zero-coupon, risk-free bond is closest to: A) $93.80 B) $90.06 C) $89.16 D) $86.39

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

4. Suppose the current zero-coupon yield curve for risk-free bonds is as follows:
Maturity
(years)
YTM
1
3
4
3.25%
3.50%
3.90%
4.25%
4.40%
The price per $100 face value of a three-year, zero-coupon, risk-free bond is closest to:
A) $93.80
B) $90.06
C) $89.16
D) $86.39

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