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Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of $1,000 Par Bond (Zero-Coupon) 1 $966.78 2 894.28 3

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

Maturity (Years) Price of $1,000 Par Bond (Zero-Coupon)
1 $966.78
2 894.28
3 803.54

a.

An 6.4% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be

b.

If at the end of the first year the yield curve flattens out at 8.1%, what will be the 1-year holding-period return on the coupon bond

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