The true price of a bond is estimated using zero-coupon bond yields.

Maturity (months)	ZCB Yield (%p.a.)
6	1.25
12	1.45
18	1.70

1. A non-callable Treasury Bond has a face value of $100 and pays coupons semi-annually at a coupon rate of 3% per annum. The bond will mature in a year and a half. Use the ZCB yields in the table to calculate the price of a Treasury bond. You must show your workings. (Worth 2 marks)
2. Calculate the forward yields out of 0.5 years from the ZCB yields in the table. Explain in your own words why these forward yields might not be accurate. You must show your workings. (Worth 2 marks)
3. Describe in your own words how the yield to maturity on the non-callable Treasury Bond can be estimated. (Worth 2 marks).