The Price of a 3-Year Zero Coupon Government Bond Is

question 2

Multiple Choice

The price of a 3-year zero coupon government bond is 85.16.The price of a similar 4-year bond is 78.81.What is the yield to maturity (effective annual yield) on the 3-year bond?

• A) 4.6%
• B) 5.5%
• C) 5.8%
• D) 6.7%

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Definitions:

First-Mover Advantage

Comes from being first to exploit a niche or enter a market.

Oligopolistic Industry

An industry structure marked by a small number of firms that dominate the market, often resulting in strategic interactions among these firms.

Strategic Behavior

Actions taken by firms or individuals that consider the anticipated reactions or responses of other firms or individuals.

Collusive Oligopoly

A market situation where a small number of firms agree, explicitly or implicitly, to control prices, market share, or other competitive dimensions, reducing or eliminating competition.