Consider the following list of prices for zero-coupon bonds with face value of $1000 of various maturities.

Maturity (years)	Bond price ($)
1	950
2	895
3	850
4	790

(a) Calculate the yield to maturity of each zero coupon bond.

(b) Calculate the implied sequence of forward rates.

(c) Suppose now you want to invest in zero coupon bond for 2 years, all the zero coupon bonds involved in this part have face value of $1000. Todays short rate is 6%. Here are two strategies:

(1) Hold 2-year maturity zero coupon bond until maturity

(2) Purchase a 3-year maturity zero coupon bond, and sell it at the end of second year.

Your expected short rate in each year are given as followed:

Time period (years)	Expected short rate
2	8%
3	5%

Which strategy will you choose? Explain.