You own a $1,000-par zero-coupon bond that has 5 years of remaining maturity. You plan on...
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You own a $1,000-par zero-coupon bond that has 5 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 0.3 0.5 Required Yield 6.60% 7.00% 0.2 1. What is your expected price when you sell the bond? Please specify each step of your calculation (15 marks) 7.20% 2. What is the standard deviation? Please specify each step of your calculation (10 marks) You own a $1,000-par zero-coupon bond that has 5 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 0.3 0.5 Required Yield 6.60% 7.00% 0.2 1. What is your expected price when you sell the bond? Please specify each step of your calculation (15 marks) 7.20% 2. What is the standard deviation? Please specify each step of your calculation (10 marks)
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