You observe a one-year discount US Treasury bond in the market with the following characteristics: Face Value of $100 and Price of $91. 1) What is the implied one-year interest rate? 2) You also observe a 2-year US Treasury bond selling at par with the following characteristics: Face value of $1,000 and annual coupon of 10%. What is the implied one-year Treasury rate for the second year?
You observe a one-year discount US Treasury bond in the market with the following characteristics: Face Value of $100 and Price of $91. 1) What is the implied one-year interest rate? 2) You also observe a 2-year US Treasury bond selling at par with the following characteristics: Face value of $1,000 and annual coupon of 10%. What is the implied one-year Treasury rate for the second year?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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You observe a one-year discount US Treasury bond in the market with the following characteristics: Face Value of $100 and Price of $91.
1) What is the implied one-year interest rate?
2) You also observe a 2-year US Treasury bond selling at par with the following characteristics: Face value of $1,000 and annual coupon of 10%. What is the implied one-year Treasury rate for the second year?
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