Sally owns a $1,000-par zero-coupon bond that has six years of remaining maturity. She plans on selling

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Sally owns a $1,000-par zero-coupon bond that has six years of remaining maturity. She plans on selling the bond in one year and believes that the required yield next year will have the following probability distribution:

Probability 0.1 0.2 0.3 0.2 0.1 0.1 Required Yield (%) 6.70 6.85 7.10 7.30 7.55 7.75

a. What is the expected price of the bond at the time of sale?
b. What is the standard deviation of the bond price?

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Financial Markets And Institutions

ISBN: 9781292215006

9th Global Edition

Authors: Stanley Eakins Frederic Mishkin

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Question Posted: Oct 16, 2023 07:24 AM

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Sally owns a $1,000-par zero-coupon bond that has six years of remaining maturity. She plans on selling

Question:

Probability 0.1 0.2 0.3 0.2 0.1 0.1 Required Yield (%) 6.70 6.85 7.10 7.30 7.55 7.75

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To find the expected price of the bond at the time of sale and the standard deviation of the bond pr...View the full answer

Financial Markets And Institutions

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