The following three default-free bonds currently trade. Bond 1 pays 100 in one year and sells for $98:039: Bond 2 has a coupon rate of 2%, and Par Value=1000, matures in two years, and sells for $98:106: Bond 3 has a coupon rate of 5% and Par Value=1000 and matures in three years, and sells for $102:96:

Determine the set of discount factors (d1;d2;d3) to five decimal places.  Determine the term structure (z1;z2;z3) as percent to three decimal places.  Assuming no arbitrage opportunities, value Bond 4 that has coupon rate of 4%, and par value of $100, and matures in three years (three decimal places).  Based on your answer to Problem 3, compute the yield to maturity on Bond 3 to three decimal places.  Determine the two-year par yield and three-year par yield.