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unable to understand the following calculations –
Bond 1: $104 = $109/(1 + r1)
r1 = ($109/$104) – 1 = 4.81%
Bond 2: $102 = $7/1.0481 + $107/(1 + r2)
2
r2 = [107/(102 – 6.68)]1/2 – 1 = 5.95%
Bond 3: $98 = $6/1.0481 + $6/1.05952 + $106/(1 + r3)
3
r3 = [106/(98 – 5.72 – 5.35)]1/3 – 1 = 6.83%Thanks in advance
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