Answers to Text Discussion Questions

If we guess a yield to maturity for the T-Bill, r, we can then value the first two T-Bond cash-flows 1 year forward. The return on the T-Bond is then (99.17+.625*(1+r)^0.5+.625 -100)/100. This must be the return on the T-Bill (1+r)^1-1 = r. ................
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