The prices of a number of $1,000 (face value) zero-coupon bonds are provided in the Table,below.Compute the yields on the zero coupon bonds.Plot the yield curve.What is the shape of the yield curve?
Definitions:
Net Present Value
A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time, used to assess the profitability of an investment.
Payback Period Method
A simple calculation that divides the initial investment by the annual cash inflows to determine how long it will take to recoup the initial investment.
Capital Budgeting
The process of planning and managing a firm's long-term investments in projects and assets.
Net Present Value
The calculation used to find today's value of a future stream of payments and receipts by discounting them at a specific rate, often used in capital budgeting to assess the profitability of an investment.
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