Maturity Par yields

0.5 1% p.a

1 2.5% p.a

1.5 3.5% p.a

2 4.3%p.a

All yields are per annum semi-annual compounding.

a) Compute the corresponding zero yields from the above information

b) Price a 2-yr T-note that pays 5% p.a. coupons

c) If the expectation hypothesis is true, what is your best guess regarding the 1-yr zero yield in a year's time?