Currently, the term structure is as follows: One-year bonds yield 11.75%, two-year bonds yield 12.75%, three-year bonds and greater maturity bonds all yield 13.75%. You are choosing between one-, two-, and three-year maturity bonds all paying annual coupons of 12.75%, once a year. You strongly believe that at year-end the yield curve will be flat at 13.75%.

a. Calculate the one year total rate of return for the three bonds. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Curiently, the term structure is as follows: Oneyeai bonds yield 11.75%, twcwear DODGE yield 12.?5%, threeyear bonds and greater matunty bonds all yield 13.?5%. You are choosing Demeen one, Ml}, and threeyea! maturity bonds all paying annuaicoupons 0f 12.?5'3E, once a year. YOU strongly believe that at yearend the yield curve Wlll be at at 13.?5'3E. a. Calculate the one yea! total rate of [eturn fot the three bonds. [Do not round intermediate calculations. Round your answers to 2 decimal places.) One Year Two Yeas Three Yeas One year total rate of return I % I St: I '36 b. Which bond you would buy? 0 Oneiyear bond 0 Twoyear bond 0 Three-year bond