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Consider the following zero-coupon yield curve Maturity T YTM 1 9% 2 10% 3 11% a. Compute the price of a 2-year maturity coupon bond

Consider the following zero-coupon yield curve

Maturity T	YTM
1	9%
2	10%
3	11%

a. Compute the price of a 2-year maturity coupon bond with a 12% coupon rate paid annually?

b. Suppose the market expects 1- and 2- year yields on zero coupon bond next year to be 10%, 11%, respectively. In this case, compute the liquidity premium f(0, 1, 3) ? E[y1,3].

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