A bank offers a two-year bond with par value $1,000 with 3% coupon rates. The prices of zero-coupon bonds of $100 par value with various maturities are shown below: Maturity (years) Price ($)

1 98.4

2 95.6

(i) Determine the yield rates of two zero-coupon bonds.

(ii) Determine the price and the current yield of the two-year bond.

(iii)Determine the yield rate of the two-year bond.

Is the two-year bond selling at par, premium, or discount? Briefly explain.

(v) Calculate the Macaulay duration.

(vi)Determine the par yield of the two-year bond.