Question: Answer the Questions please with your own words and calculation if needed so i can up vote 1. You own a $1,000-par zero-coupon bond that

Answer the Questions please with your own words and calculation if needed so i can up vote

1. You own a $1,000-par zero-coupon bond that has 6 years of remaining maturity. You plan on selling the bond in one year and believe that the yield next year will have the following probability distribution:

Probability

Yield

0.1

1.70%

0.2

1.75%

0.4

2.20%

0.2

2.25%

0.1

2.50%

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

b. What is the risk associated with the bond (standard deviation)?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!