c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.) YTM % d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected total rate of return 8.99 % e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected total rate of return %
c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.) YTM % d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected total rate of return 8.99 % e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected total rate of return %
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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Transcribed Image Text:The current yield curve for default-free zero-coupon bonds is as follows:
Maturity (years) YTM
9.0%
1
2
3
10.0
11.0
a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Maturity (years)
1
2
3
YTM
9.0%
10.0%
11.0%
11.01%
13.03 %

Transcribed Image Text:c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal
places.)
YTM
%
d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the
current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected total rate of return
8.99 %
e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the
current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected total rate of return
%
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