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**CFA Practice Question**

The spot rates for years 1, 2, and 3 are 5.31%, 5.54% and 5.77% respectively. What is the YTM for a 3 year bond that pays yearly coupons of 5%?

A. 5.5548%

B. 5.7548%

C. 5.6548%

**Explanation:**First find price of bond by adding present values of coupons and face (paid on maturity). Then find YTM.

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**User Contributed Comments**
3

User |
Comment |
---|---|

Mariana80 |
Can anyone explain? No matter how I calculate this I don't get that answer. |

Rivermax |
coupon is 5 so: 5/(1.0531)+ 5/(1.0554)^2+ 105/(1.0577)^3 =97.97315 Put this into calculator PV=-97.97315 N=3 PMT=5 FV=100 CPT I/Y =5.7548 |

chcarnes |
I did the first part by hand then plugged the PV into the calc |