We consider four zero-coupon bonds (strips) with the following features: Each strip delivers $100 at maturity. (a) (5 marks) Calculate the price and the yield to maturity of a 3-year coupon bond which has a face value of $100, and the coupon rate is 10% per year. (b) (3 marks) Calculate the 1-year and 2-year forward rate one year from now. (c) (3 marks) If you are a believer of pure expectation hypothesis, calculate the expected price of the coupon bond at the end of the first year and the expected holding period return on the coupon bond over the first year. Briefly discuss what you have observed. (d) (4 marks) Will the expected rate of return be higher or lower than part (c) if you accept the liquidity preference hypothesis? Briefly discuss. We consider four zero-coupon bonds (strips) with the following features: Each strip delivers $100 at maturity. (a) (5 marks) Calculate the price and the yield to maturity of a 3-year coupon bond which has a face value of $100, and the coupon rate is 10% per year. (b) (3 marks) Calculate the 1-year and 2-year forward rate one year from now. (c) (3 marks) If you are a believer of pure expectation hypothesis, calculate the expected price of the coupon bond at the end of the first year and the expected holding period return on the coupon bond over the first year. Briefly discuss what you have observed. (d) (4 marks) Will the expected rate of return be higher or lower than part (c) if you accept the liquidity preference hypothesis? Briefly discuss