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Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $91.20, while a 2-year zero sells at $84.28. You are considering the

  1. Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $91.20, while a 2-year zero sells at $84.28. 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 6% per year.
  1. What is the yield to maturity of the 2-year zero?

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

c. What is the forward rate for the second year? That is what is f1,2?

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