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Unformatted text preview: The yield curve (yields vs. maturities, all else equal) is depicted for U.S. Treasuries more frequently than for corporate bonds, as the risk is constant across maturities for Treasuries. 5. What should the purchase price of a 2year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000? A. $877.54 B. $888.33 C. $883.32 D. $893.36 E. $871.80 $1,000 / [(1.064)(1.071)] = $877.54 6. What would the yield to maturity be on a fouryear zero coupon bond purchased today? A. 5.80% B. 7.30% C. 6.65% D. 7.25% E. none of the above. [(1.058) (1.064) (1.071) (1.073)] 1/4 1 = 6.65% 7. Calculate the price at the beginning of year 1 of a 10% annual coupon bond with face value $1,000 and 5 years to maturity. A. $1,105 B. $1,132 C. $1,179 D. $1,150 E. $1,119 i = [(1.058) (1.064) (1.071) (1.073) (1.074)] 1/5 1 = 6.8%; FV = 1000, PMT = 100, n = 5, i = 6.8, PV = $1,131.91...
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This note was uploaded on 01/26/2009 for the course FBE 441 taught by Professor Callahan during the Fall '07 term at USC.
 Fall '07
 Callahan

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