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Consider the following zero-coupon yield curve on default free securities: Maturity Annual Yield to Maturity Periodic (Semi- Annual) Rate 6 Months 2.00% 1.00% 1 Year

Consider the following zero-coupon yield curve on default free securities:

Maturity Annual Yield to Maturity Periodic (Semi- Annual) Rate
6 Months 2.00% 1.00%
1 Year 2.30% 1.15%
1.5 Years 2.60% 1.30%
2 Years 3.00% 1.50%
2.5 Years 3.50% 1.75%
3 Years 4.00% 2.00%

Assume semi-annual compounding and zero risk for all bonds discussed.

Download this Excel answer file with this information in it. Use it to answer the following two questions showing your work and then upload your file to answer this question.

Part a: What is the price of a $1,000 Face Value 3 year coupon bond with a 5% annual coupon rate paid semi-annually?

Part b: Given the price from part a, what is the (annual) yield to maturity on the 3 year coupon bond?

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