a. c. a) At your favorite bond store, Bonds-R-Us, you see the following prices: 1-year $1000 zero selling for $950 b. 3-year 5% coupon $1000 par bond selling for $1000 2-year 4% coupon $1000 par bond selling for $1000 Assume that the pure expectations theory for the term structure of interest rates holds, no liquidity or maturity premium exists, and the bonds are equally risky. What is the implied 1-year rate two years from now? (7 marks) b) A $100 face-value bond has 10 years to mature. It pays semi-annual coupon interest at the rate of 5% p.a. and its yield to maturity is 7% p.a. What is the duration of this bond in years? (8 marks) a. c. a) At your favorite bond store, Bonds-R-Us, you see the following prices: 1-year $1000 zero selling for $950 b. 3-year 5% coupon $1000 par bond selling for $1000 2-year 4% coupon $1000 par bond selling for $1000 Assume that the pure expectations theory for the term structure of interest rates holds, no liquidity or maturity premium exists, and the bonds are equally risky. What is the implied 1-year rate two years from now? (7 marks) b) A $100 face-value bond has 10 years to mature. It pays semi-annual coupon interest at the rate of 5% p.a. and its yield to maturity is 7% p.a. What is the duration of this bond in years? (8 marks)