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You are considering investing in a 19% coupon rate bond with annual coupons, a three-year maturity and a face value of 1000. You observe the

You are considering investing in a 19% coupon rate bond with annual coupons, a three-year maturity and a face value of 1000. You observe the following rates for discount, or zero-coupon, bonds:

Time To Maturity 1 year 2 years 3 years
Zero-Coupon Bond YTM 4.6% 4.4% 3.8%

(a) What is the fair market price of the bond? (b) What is the yield to maturity of the bond? (c) What does the market expect the 1 year rate to be in 1 year from now? (d) What does the market expect the 1 year rate to be in 2 years from now? (e) What does the market expect the 2 year rate to be in 1 year from now?

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