Assume the zero-coupon yields on default-free securities are as summarized in the following table:(Click on the following icon

in order to copy its contents into a spreadsheet.)

Maturity (years)	1	2	3	4	5
Zero-coupon YTM	4.00%	4.30%	4.50%	4.70%	4.80%

Consider a five-year, default-free bond with annual coupons of

5%

and a face value of

$1,000.

a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain.

b. What is the yield to maturity on this bond?

c. If the yield to maturity on this bond increased to

5.20%,

what would the new price be?

Question content area bottom

Part 1

a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain.

The bond is trading at

a discount

par

a premium

because its yield to maturity is a weighted average of the yields of the zero-coupon bonds.(Select from the drop-down menu.)

Part 2

b. What is the yield to maturity on this bond?

The yield to maturity on this bond is

enter your response here%.

(Round to three decimal places.)

Part 3

c. If the yield to maturity on this bond increased to

5.20%,

what would the new price be?

The new price would be

$enter your response here.