The YTM on 1-year ZCBS is 2%. You expect the YTM on 1-year ZCBs to be...
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▪ The YTM on 1-year ZCBS is 2%. You expect the YTM on 1-year ZCBs to be 4% next year. What is your expected 2-year HPR on buying a 1-year ZCB and reinvesting the money in a 1-year ZCB next year? ▪ The YTM on 2-year ZCBS is 4% and you are risk- neutral and your investment horizon is 2 years. Do you prefer buying a 2-year ZCB or investing in short term bonds as suggested above? ▪ The YTM on 1-year ZCBS is 2%. You expect the YTM on 1-year ZCBs to be 4% next year. What is your expected 2-year HPR on buying a 1-year ZCB and reinvesting the money in a 1-year ZCB next year? ▪ The YTM on 2-year ZCBS is 4% and you are risk- neutral and your investment horizon is 2 years. Do you prefer buying a 2-year ZCB or investing in short term bonds as suggested above?
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Answer rating: 100% (QA)
The Holding Period Return HPR for a zerocoupon bond ZCB can be calculated using the formula HPR FVPV ... View the full answer
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