Currently, the term structure is as follows: 1-year zero-coupon bonds yield 7%; 2-year zero-coupon bonds yield 8%; 3-year and longer-maturity zero-coupon bonds all yield 9%. You are choosing between 1-, 2-, and 3-year maturity bonds all paying annual coupons of 8%. a. What is the price of each bond today? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

price(today)

1year

2year

3year b. What will be the price of each bond in one year if the yield curve is flat at 9% at that time? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Price (IN ONE YEAR)

1year

2year

3year

c. What will be the rate of return on each bond? (Do not round intermediate calculations. Round your answers to 2 decimal places.) rate of return

1year %

2year %

3year %