Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 6.50% 7.00% 7.20% 7.60% 7.80% What is the maturity of a default-free securi

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Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 6.50% 7.00% 7.20% 7.60% 7.80% What is the maturity of a default-free securi

Assume the zero-coupon yields on default-free securities are as summarized in the following table:

Maturity

1 year

2 years

3 years

4 years

5 years

Zero-Coupon Yields

%

What is the maturity of a default-free security with annual coupon payments and a yield to maturity of ? Why?

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Answer 1

Answer #1

What is the maturity of a default-free security with annual coupon payments and a yield to maturity of ?

Answer 1 year

why?

Answer It must be one year otherwise there will be an arbitrage opportunity.

answered by: Andrew San Andres

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Answer 2

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Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 6.50% 7.00% 7.20% 7.60% 7.80% What is the maturity of a default-free securi

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