Principles of Corporate Finance
Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 21PS

Spot interest rates and yields Assume annual coupons.

  1. a. What is the formula for the value of a two-year, 5% bond in terms of spot rates?
  2. b. What is the formula for its value in terms of yield to maturity?
  3. c. If the two-year spot rate is higher than the one-year rate, is the yield to maturity greater or less than the two-year spot rate?
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Principles of Corporate Finance

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