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Unformatted text preview: working with. You can think of this as the equation that will determine the official published YTM. b. Now write out the equation for the expected YTM, which is the equation that takes into account that investors actually expect to receive only 70% of the par value and coupon payment at maturity. c. Which YTM is higher? Why? d. Suppose instead that the YTM is fixed at the stated YTM from part a. What will happen to the price of the bond, given the risk of default of the final payment? Part 3: The following chart is the yield curve from October 2007. Based on the expectations hypothesis, what does the above yield curve tell you about short-term interest rates over the next 30 years?...
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- Fall '11
- Interest Rates