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# Thread: a question for prof broverman question 15 may 2005 exam

1. ## a question for prof broverman question 15 may 2005 exam

hi. I naively got the solution to this question simply by using the interest rates given, ie the 5% for both bonds and got the correct answer. However, based on the first part of your solution, if both bonds didn't have the same interest rates, then I am assuming I would have to do some more work??

Thanks.

2. Audia,

Since both bonds have a yield rate of 5% that will be the yield
for one-year zero and two-year zero coupon bonds, so pv's
will be at 5%. If the two bonds had different yield rates, there
would have been some work involved.

Suppose that we have a one year coupon bond with annual coupons and a two year coupon bond with annual coupons. If both bonds have a yield
rate of i, then the one year zero rate is i and the 2-year zero
rate will also be i.