Question at your favorite bond store you see the following, Ask an Expert

Economics

Question: At your favorite bond store, you see the following prices:

• 1-year $100 zero selling for $90.19

• 3-year 10% coupon $1000 par bond selling for $1000

• 2-year 10% coupon $1000 par bond selling for $1000

Assume that the pure expectations theory for the term structure of interest rates holds, no liquidity premium exists, and the bonds are equally risky. What is the 1-year forward rate two years from now?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M93116231

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