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Suppose the current yield on a one-year zero-coupon bond is 2%,
Suppose the current yield on a one-year zero-coupon bond is 2%, while the yield on a five-year zero coupon bond is 4%. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not rise above what level? (Assume a $1 Face Value bond) Hint: Make sure to round all intermediate calculations to at least four decimal places.
This question was answered on: Feb 21, 2020
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