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Using Spot Rates, the Theoretical Value of a Bond Is

Question 2

Multiple Choice

Using spot rates, the theoretical value of a bond is calculated:


A) As the present value of all expected future cash flows.
B) By discounting a cash flow for a given period by the corresponding spot rate for that period.
C) By discounting all future cash flows at the riskfree rate.
D) By compounding all expected future cash flows.
E) None of the above.

Correct Answer:

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