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Problem 1 (12 points) (a) The following is a list of prices for zero-coupon riskless bonds of various maturities, all with face value of S1000.

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Problem 1 (12 points) (a) The following is a list of prices for zero-coupon riskless bonds of various maturities, all with face value of S1000. Calculate the (EAR) yields to maturity of each bond yi, 2, and ys, and the implied forward rates fi, f2, and fs. (8 points) Maturity (years) Price of Bond $970.87 $901.96 fs Show your work. (b) Using the forward rates you computed in part (a), and assuming the expectations hy pothesis is valid, what is the market's expected price of the current 3-year bond 2 years from now (when it will be a 1-year bond)? (4 points) Expected Price: Show your work

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