You have been given the following coupon yield curve: Maturity (years) 1 2 4 Coupon Rate (annual payments) 0% 8% 10% 12% YTM 1.5% 2.31% 3.10% 4.12% Use arbitrage to determine the YTM of a two-year, zero coupon bond. (Hint: The price of a on year zero coupon bond with face value of $80 is $78.81.)

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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You have been given the following coupon yield curve:
Maturity (years)
1
2
4
Coupon Rate (annual
payments)
0%
8%
|10%
12%
ΥTM
1.5%
2.31%
3.10%
4.12%
Use arbitrage to determine the YTM of a two-year, zero coupon bond. (Hint: The price of a one
year zero coupon bond with face value of $80 is $78.81.)
Transcribed Image Text:You have been given the following coupon yield curve: Maturity (years) 1 2 4 Coupon Rate (annual payments) 0% 8% |10% 12% ΥTM 1.5% 2.31% 3.10% 4.12% Use arbitrage to determine the YTM of a two-year, zero coupon bond. (Hint: The price of a one year zero coupon bond with face value of $80 is $78.81.)
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