A company has liabiliies of 2000 and 5000 due at the end of years one and three respectively. The investments available to the company are two zero coupon bonds. The irst one-year 1000 par value bond with an annual effective rate of 5.6%. The second is a three-year 1000 par bond. If the cost of exactly matching liabilities is 6068.36, what is the annual effective yield on the second bond?

a. 5.2% b. 5.5% c. 5.8% d. 6% e. 6.2%

Please, no excel spreadsheets.