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

What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 4%? Does this bond trade at a discount, at par, or at a premium?

Note:

Assume annual compounding.

Maturity Zero-Coupon Yields 1 year 5.9% 2 years 6.3% 3 years 6.5% 4 years 6.8% 5 years 7.2%