The yield to maturity on a 1-year zero-coupon bond is currently 7%; the YTM on 2-year zeros is 8%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $100. a. At what price will the bond sell? (You may use Excel, in which case you should show the Excel formula(e) and the inputs.) b. What will the yield to maturity on the bond be? c. If the expectations theory of the yield curve is correct, what is the market expectation of the price for which the bond will sell next year? please explain the fomula applied carefully

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...
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The yield to maturity on a 1-year zero-coupon bond is
currently 7%; the YTM on 2-year zeros is 8%. The Treasury
plans to issue a 2-year maturity coupon bond, paying coupons
once per year with a coupon rate of 9%. The face value of the
bond is $100.
a. At what price will the bond sell? (You may use Excel, in
which case you should show the Excel formula(e) and the
inputs.)
b. What will the yield to maturity on the bond be?
c. If the expectations theory of the yield curve is correct,
what is the market expectation of the price for which the
bond will sell next year?

please explain the fomula applied carefully

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