Below is a list of prices for zero-coupon bonds of various maturities.

Maturity Price of $1,000 Par Bond (Zero-Coupon)

1year 943.40

2 873.52

3 816.37

a. An 8.5% coupon $1,000 par bond pays an annual coupon will mature in 3 years. What should the bond price be?

b. If at the end of the first year the yield curve flattens out at 8%, what will be the 1-year holding-period return on the coupon bond?