Question 1 (15 points 5 each) Suppose that a 1-year zero-coupon bond with a face value of $100 currently trades at $94.34, while a 2-year zero trades at $84.99. You are considering the purchase of a 2-year maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 12%.

What is the yield to maturity of the 2-year zero?

What is the yield to maturity of the 2-year coupon bond?

Why do the yields to maturity in parts (a) and (b) differ? (one sentence is all that is required)