You own a $1,000-par zero-coupon bond that has five years of remaining maturity. You plan on selling

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You own a $1,000-par zero-coupon bond that has five years of remaining maturity. You plan on selling the bond in one year, and believe that the required yield next year will have the following probability distribution:

Probability Required Yield %

0.1 .........6.60%

0.2 .........6.75%

0.4 .........7.00%

0.2 .........7.20%

0.1 .........7.45%

a. What is your expected price when you sell the bond?

b. What is the standard deviation of the bond price?

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Financial Markets And Institutions

ISBN: 978-0132136839

7th Edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

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Question Posted: Nov 12, 2012 01:09 AM

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You own a $1,000-par zero-coupon bond that has five years of remaining maturity. You plan on selling

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Probability Required Yield Price Prob Price Prob Price Exp Price 2 01 660 7...View the full answer

Financial Markets And Institutions

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