1. A coupon bond can be thought of as a portfolio of zero-coupon bonds, so one way to price a coupon bond is to use the zero-rate curve. Suppose, for example, you wanted to price a 3-year bond paying 5% coupons annually. You could break up the bond into pieces the cash flows paid in year 1, year 2, and year 3 then calculate each pieces present value and sum them to determine the price of the bond. You could then use this price to back out the bonds yield to maturity. Given the zero-rate curve below, what is yield to maturity on a 3-year bond paying 5% coupons annually? Report your answer in percent to two decimal places (e.g., 1.23%). Assume all bonds have no default risk, and you may ignore technical issues like settlement dates, etc.

Term (years)	Zero rate (% pa)
1	3%
2	3.25%
3	3.4%