Unformatted text preview: of face value) does it sell for today if its yield to maturity is 7%?  ( Assume, that interest rate payments are made annually and that the yield to maturity is quoted as an APR with annual compounding ) 7. Would you expect the yield to maturity on a 10 year government bond to be higher or lower than on a three month t-bill (under normal circumstances)? Explain! Note, that both face no risk of default. 8. Peter is happy about a job offer. He has the option to obtain the salary at the beginning or at the end of the respective month of work. How much higher/ lower must be the monthly payout of the late option relative to the early option to make him indifferent between accepting either contract? Assume a flat interest rate across all maturities!...
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- Inflation, regular T-period annuity