Question: Suppose six-month Term SOFR is 3% per year (continuously compounded) and a one-year 5% coupon bond has a YTM (semi-annual compounding) of 4% per year.

Suppose six-month Term SOFR is 3% per year (continuously compounded) and a one-year 5% coupon bond has a YTM (semi-annual compounding) of 4% per year.

1. What is the implied rate on a zero-coupon bond with 1 year to maturity (expressed in continuous compounding)?

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