Question: YIELD CURVE FOR ZERO COUPON BONDS RATED AA Maturity YTM 1 Year 8.00 % 2 Year 8.11 % 3 Year 8.20 % 4 Year 8.50
YIELD CURVE FOR ZERO COUPON BONDS RATED AA
| Maturity |
| YTM |
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| 1 | Year |
| 8.00 | % |
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| 2 | Year |
| 8.11 | % |
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| 3 | Year |
| 8.20 | % |
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| 4 | Year |
| 8.50 | % |
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| 5 | Year |
| 8.75 | % |
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| 6 | Year |
| 8.85 | % |
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Assume that there are no liquidity premiums.
You just bought a 6-year IBM corporate bond rated AAA with a 0 percent coupon. You expect to sell the bond in 3 years. Find the expected interest rate at the time of sale (watch out for rounding error).
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