Question: Exercise 2: The following table shows information on two traded bonds that make annual payments: Bond Face value Coupon Maturity Price $100 39 2 years

Exercise 2: The following table shows information on two traded bonds

Exercise 2: The following table shows information on two traded bonds that make annual payments: Bond Face value Coupon Maturity Price $100 39 2 years $85.10 B $100 10% 2 years $97.00 a. What should the (no-arbitrage) price of a 2-year zero-coupon bond with a face value of $100 be? b. What are the 1-year and 2-year interest rates embedded into these prices? Express your answers in annual terms e. What is the yield to maturity of a 2-year zero-coupon bond with a face value of $100? d. What are the yields to maturity of bonds A and B

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