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What are the implied forward rates

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Reference no: EM132502504

The yields on 1-year, 2-year and 3-year, risk-free, zero-coupon bonds are 2%, 2.5% and 3%, respectively.

a) What is the value of a 3-year, risk-free bond with a coupon rate of 4% (annual coupons) and a face amount of $1,000?

b) What are the implied forward rates in the 2nd and 3rd years (f1 and f2)?

c) Under the expectations hypothesis, what are the expected yields on 1-year and 2-year zero coupon bonds 1 year from now (at time 1)?

Reference no: EM132502504

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