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Chapter 11: Expectations theory

Discussion in 'CP1' started by Phani Vasantarao, Dec 5, 2020.

  1. Phani Vasantarao

    Phani Vasantarao Very Active Member

    Hello,

    It seems to me that the example on page 11, chapter 11 is using the wrong formula to determine the price of a 5-year zero coupon bond:

    "The price of the 5-year zero-coupon bond today is: 100/(1.05^10)"

    Am I being dense, or is this plain wrong?
     
    Phani Vasantarao, Dec 5, 2020
    #1
  2. mugono

    mugono Ton up Member

    Is the discount rate used a 6 month rate...
     
    mugono, Dec 5, 2020
    #2
    Phani Vasantarao likes this.
  3. Phani Vasantarao

    Phani Vasantarao Very Active Member

    Thanks, it is 10% annual but convertible half-yearly. I missed reading that small detail
     
    Phani Vasantarao, Dec 5, 2020
    #3

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