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Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate 1 5 % 2 6 3 7 In addition to the

Prices of zero-coupon bonds reveal the following pattern of forward rates:

Year Forward Rate
1 5 %
2 6
3 7

In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $50 with par value $1,000.

a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. If you forecast that the yield curve in 1 year will be flat at 6.0%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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