QUESTION 3 Assume the current yield curve is as follows: Maturity (years) Yield 1 2.500% 2 3.500% 3 4.000% Assuming semi-annual compounding and that zero coupon bonds of all maturities are available, an investor wants to "ride' the yield curve and considers the following strategies: i. ii. Buying a 2 year zero coupon bond today and holding it until maturity Buying a 3 year zero coupon bond today and selling it in two year's time (a): What is the 2-year holding period yield from buying a two-year bond today and holding it to maturity? Select] (b): What is the 2-year holding period yield from buying a three-year bond today and selling it in two year's time? Select (c): Assume that in one year's time, the yield curve will shift upwards by 0.50%. What is the 2-year holding period yield from buying a one-year bond today, holding it to maturity and then buying another one-year bond and holding it to maturity? [Select ] (d): What is f(1.2)? (Select) (e): What is f(2,3)? [Select]