The following is a list of prices today for zero coupon bonds with different maturities and par value of $1,000.

Maturity (years) Price

1 $917.43

2 $826.51

3 $737.96

4 $653.06

(a) What is the yield to maturity on the three year zero coupon bond?

(b) According to the expectations theory, what would be the market's expectation of the one year interest rate in the third year?

(c) Assume that you purchased a four year maturity coupon bearing bond with a 10% coupon rate paid annually, with a par value of $1,000. Calculate the price of the bond one year from now if the implied forward rates remain the same.