Question: Assume that a 1-year zero coupon bond with a face value of $100 is currently selling for $94.34, while a 2-year zero coupon bond is

Assume that a 1-year zero coupon bond with a face value of $100 is currently selling for $94.34, while a 2-year zero coupon bond is selling for $84.99. You are considering purchasing a bond with a 2-year maturity that pays annual coupons. The face value of the bond is $100 and the coupon rate is 12% per year.

(a) What is the yield to maturity from zero to 2 years?

(b) What is the yield to maturity of the 2-year coupon bond?

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a To calculate the yield to maturity YTM from zero to 2 years you can use the following formula YTM ... View full answer

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