Question: 2 Problem 4. Recall that in class, we can find the present value of a bond, PV, by discounting the cash flows using both the

2 Problem 4. Recall that in class, we can find the

2 Problem 4. Recall that in class, we can find the present value of a bond, PV, by discounting the cash flows using both the interest rates, or the bond yield. For example, for a two-year bond: C1 1+ri C2 + F + (1+r2) = PV = C1 1 + y C2 + F + (1+y)2 Consider the following bonds with a $100 face value: Maturity Coupon Rate Yield Two Year Two Year 5 10 9.838% 9.699% Find annualized one-year rate (ri) and two year rate (r2)

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