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Problem 4: Zero-coupon vs Coupon A zero-coupon bond with maturity 1 year and face value $100 currently sells for 94.34$. A zerocoupon bond with maturity
Problem 4: Zero-coupon vs Coupon A zero-coupon bond with maturity 1 year and face value $100 currently sells for 94.34$. A zerocoupon bond with maturity 2 years and face value $500 currently sells for 462.25$. 1. Estimate the yield to maturity of the 1-year zero-coupon bond. 2. Estimate the yield to maturity of the 2-year zero-coupon bond. 3. Using the yields you estimated in (1) and (2), price a 2-year coupon bond with F = 1, 000$ and c = 5% (paid annually). 4. Is the yield-to-maturity of the coupon bond above, below or exactly 5%?
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