Question: Suppose the current yield on a one year zero coupon bond is 4%, while the yield on a five-year zero coupon bond is 5% Nether
Suppose the current yield on a one year zero coupon bond is 4%, while the yield on a five-year zero coupon bond is 5% Nether bond has any risk of default Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not the above what level? (Assume $1 face value bond.) Hint: It is best not to round intermediate calculations - make sure to carry at least four decimal places in intermediate calculations Note: Assume annual compounding The yield should not rise above % (Round to two decimal places)
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