3. Consider the following two bonds: 1 (a) Find the no-arbitrage prices of one and two-year zero-coupon bonds (per $100 of face value) implied by the prices of these coupon bonds. Hint: You need to solve for two unknowns, the present value of a dollar paid in year 1 and the present value of a dollar paid in year 2. Another name for these present values is the "discount factors" for years 1 and 2. Write the prices of the two given bonds in terms of the two unknown discount factors and solve the resulting two equations in two variables for them. Then multiply each discount factor by $100 to get the prices of $100 face value zero-coupon bonds (i.e., the present values of 100 dollars paid in year 1 and year 2, respectively). (b) Using your answers from part (a), compute the yields to maturity on one and two-year zero coupon bonds (i.e., the zero-coupon yield curve). 3. Consider the following two bonds: 1 (a) Find the no-arbitrage prices of one and two-year zero-coupon bonds (per $100 of face value) implied by the prices of these coupon bonds. Hint: You need to solve for two unknowns, the present value of a dollar paid in year 1 and the present value of a dollar paid in year 2. Another name for these present values is the "discount factors" for years 1 and 2. Write the prices of the two given bonds in terms of the two unknown discount factors and solve the resulting two equations in two variables for them. Then multiply each discount factor by $100 to get the prices of $100 face value zero-coupon bonds (i.e., the present values of 100 dollars paid in year 1 and year 2, respectively). (b) Using your answers from part (a), compute the yields to maturity on one and two-year zero coupon bonds (i.e., the zero-coupon yield curve)