The following table summarizes prices of variousâ default-free zero-coupon bondsâ ($100 faceâ value):
Maturityâ (years)
1
2
3
4
5
Priceâ (per $100 faceâ value)
â$95.56
â$91.05
â$86.46
â$81.68
â$76.57
a. Compute the yield to maturity for each bond.
b. Plot theâ zero-coupon yield curveâ (for the first fiveâ years).
c. Is the yield curve upwardâ sloping, downwardâ sloping, orâ flat?
Noteâ: Assume annual compounding.
The following table summarizes prices of variousâ default-free zero-coupon bondsâ ($100 faceâ value):
| Maturityâ (years) | 1 | 2 | 3 | 4 | 5 |
| Priceâ (per $100 faceâ value) | â$95.56 | â$91.05 | â$86.46 | â$81.68 | â$76.57 |
a. Compute the yield to maturity for each bond.
b. Plot theâ zero-coupon yield curveâ (for the first fiveâ years).
c. Is the yield curve upwardâ sloping, downwardâ sloping, orâ flat?
Noteâ: Assume annual compounding.
Related questions
Suppose theâ current, zero-coupon, yield curve forâ risk-free bonds is asâ follows:
| Maturityâ (years) | 1 | 2 | 3 | 4 | 5 |
| Yield to Maturity | 4.51 | 4.84 | 5.00â% | 5.12â% | 5.37â% |
a. What is the price per $100 face value of a 3â-year, zero-coupon risk-freeâ bond?
b. What is the price per $100 face value of a 5â-year, zero-coupon, risk-freeâ bond?
c. What is theâ risk-free interest rate for a 3â-year maturity?
Noteâ: Assume annual compounding.
