1)

What will be the relationship among the coupon rate, current yield, and yield to maturiy for bonds selling at discounts from par? Illustrate using the 8% (semiannual payment) coupon bond assuming it is selling at a yield to maturity of 10%.

Current yield exceeds yield to maturity, which exceeds coupon rate.

Yield to maturity exceeds coupon rate, which exceeds current yield.

Yield to maturity exceeds current yield, which exceeds coupon rate.

Coupon rate exceeds current yield, which exceeds yield to maturity

2)

Suppose the YTM for a 2-year zero coupon bond is 9.0% and the price currently of the 3-year zero coupon bond is $761.65. What is the YTM of the 3-year zero coupon bond? What is the forward rate for the third year?

	10.51%; 9.5%
	9.75%; 10.24%
	10.24%; 9.75%
	9.5%; 10.51%