Consider a 2-year coupon bond with coupon rate 10% and par 1000.The interest rate is 6%. Suppose tha

Consider a 2-year coupon bond with coupon rate 10% and par 1000.The interest rate is 6%. Suppose that immediately after you boughtthe bond you got new information that next year there is a 50%probability that the one year interest rate will be 4% and 50% thatit will be 6%. Question:Find the expected realized yield of thebond. Comment: The realized yield will be known at the end of the lifeof the bond. And expected realized yiled is what you expect therealized yield to be given the expected interest rate nextperiod. . . .

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