Fixed Income Securities 4. Today is t = 0. You have just bought a five-year zero-coupon Treasury bond with $100 face value. You paid $80. (a) What is the annually compounded yield to maturity on the bond? (b) Suppose that yields at all maturities decrease to 2% immediately after you have purchased the bond. Calculate the annualized holding period return if you sell the bond one year after you have purchased it, at t = 1. (c) What is the annually compounded yield to maturity on the bond at t = 1?

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.