Question

The following table summarizes prices of various​ default-free zero-coupon bonds​ ($100 face​ value): Maturity​ (years) 1...

The following table summarizes prices of various​ default-free zero-coupon bonds​ ($100 face​ value):

Maturity​ (years)

1

2

3

4

5

Price​ (per $100 face​ value)

​$96.95

​$92.52

​$88.00

​$83.13

​$78.10

a. Compute the yield to maturity for each bond.

b. Plot the​ zero-coupon yield curve​ (for the first five​ years).

c. Is the yield curve upward​ sloping, downward​ sloping, or​ flat?

Note​:

Assume annual compounding.

a. Compute the yield to maturity for each bond.

The yield on the​ 1-year bond is

nothing​%.

​(Round to two decimal​ places.)

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