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Year Forward Rate 1 2 3 5% 7 8 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual
Year Forward Rate 1 2 3 5% 7 8 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $60 with par value $1,000. a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If you forecast that the yield curve in 1 year will be flat at 7%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) > Answer is complete but not entirely correct. a. Price b. Yield to maturity C. Realized compound yield d. Holding period return $ 984.14 6.66 % 6.66 % 7.94 %
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