1. You have some money to invest for the next five years. You want to invest in zero coupon bonds. One option you are considering is buying a five-year zero-coupon bond and holding it until maturity. The five-year spot rate is 3.25%. Another option you are considering is buying a three-year zero-coupon bond. When it matures you will then purchase a two-year zero-coupon bond. The current three-year spot rate is 2.5%. What should you expect the two-year spot rate to be in three years from now (when the three- year bond matures and you reinvest in a new two-year bond)? pays 2. Consider a five-year $1,000 face value bond with a 4.75% coupon rate. This bond annual coupons. The current yield to maturity is 4.25%. What is the market price of this bond? Is it trading at a discount, premium, or on par?