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7. [5 points] Your corporate research team has come up with the following zero-coupon yields: Maturity 1 year 2 years 3 years 4 years Zero-coupon
7. [5 points] Your corporate research team has come up with the following zero-coupon yields: Maturity 1 year 2 years 3 years 4 years Zero-coupon yield to maturity 3.50% 4:00% 4.5% 4.75% Given the information provided in this table and assuming a $1,000 face value: A. What is the value of a 3-year coupon bond with 4% annual coupons? B. Which of the following bonds has the highest yield to maturity: A 3-year coupon bond with 4% annual coupons or a 3-year coupon bond with 10% annual coupons? All of these bonds are default free. Why? (SHOW WORK)
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