Prices for zero-coupon bonds of various maturities

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Reference no: EM131859912

The following is a list of prices for zero-coupon bonds of various maturities.

year price of bond

1 961.54

2 907.03

a) What is the yield to maturity of an 8% coupon bond with 2 years to maturity? Assume annual coupon

b) If the Liquidity Preference Theory is accepted, assume that the liquidity premium is 1% for all maturities what are

-the expected price of the coupon bond at the end of the first year

-the expected holding-period return on the coupon bond over the first year?

Reference no: EM131859912

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