You Are Given Two Discount Bonds of One-Year and Two-Year

question 10

Multiple Choice

You are given two discount bonds of one-year and two-year maturities, with prices of 95 and 90, respectively. A third bond of three-year maturity and an annual coupon of 8% is trading at par. What is the three-year continuously-compounded zero-coupon rate?

• A) 7.7%
• B) 7.8%
• C) 7.9%
• D) 8.0%

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Definitions:

Physiological Effects

The physical responses or changes in the body resulting from various factors or stimuli, such as exercise, stress, or medication.

Depressive Disorders

A category of mood disorders that cause persistent feelings of sadness and loss of interest, impacting daily functioning.

Major Depressive Disorder

A serious mood disorder characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in most activities.

Persistent Depressive Disorder

A unipolar mood disorder that manifests many of the same symptoms as major depression, except that they are less severe. It persists for at least two years, with only brief interludes of normal mood. Also known as dysthymia.