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Currently, the term structure is as follows: 1-year zero-coupon bonds yield 7%, 2-year bonds yield 8%, 3-year bonds and longer-maturity bonds all yield 9%. You are choosing between 1-, 2-, and 3-year maturity bonds all paying annual coupons of 8%.

a. What is the total rate of return on each bond? (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "%" sign in your response.)

Total Rate of Return

1 Year %

2 Years %

3 Years %

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92100862

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