QUESTION 3 Assume the current yield curve is as follows:

Maturity (years)	Yield
1	5.000%
2	6.000%
3	7.000%

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. Buying a 2 year zero coupon bond today and holding it until maturity ii. Buying a 3 year zero coupon bond today and selling it in two years time (a): What is the 2-year holding period yield from buying a two-year bond today and holding it to maturity? [ Select ] ["12.000%", "11.151%", "5.576%", "6.000%", "None of the other answers is correct"] (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 ] ["9.218%", "8.007%", "None of the other answers is correct", "4.609%", "16.015%"] (c): Assume that in one year's time, the yield curve will shift upwards by 1.00%. 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 ] ["5.000%", "5.730%", "11.461%", "None of the other answers is correct", "5.499%"] (d): What is f(1,2)? [ Select ] ["7.005%", "7.010%", "4.005%", "4.009%", "None of the other answers is correct"] (e): What is f(2,3)? [ Select ] ["4.028%", "9.015%", "4.014%", "9.028%", "None of the other answers is correct"]