You currently have $15,000 that you plan to use to buy a car. You prefer a new car, but you are also open to a used car. Either way you will pay cash. The cost of a new car today (in 2012) is $22,500, but the cost for new versions of this car is projected to rise by 2% per year through 2017. Instead of a new car, you could buy a 2012 model later in the used-car market. The price of the 2012 model is expected to decline by 15% per year through 2017. You plan to invest your $15,000 into BBB-rated bonds, but you are not sure whether you should invest in successive one-year bonds, or in longer-term bonds. The five-year yield curve for zero coupon bonds rated BBB is given below to help you make your decision. Use this data for the following questions Term 1 year 2 years 3 years 4 years 5 years YTM 10.00% 11.00% 12.00% 13.00% 14.00% 1. Which bond, if held to maturity, provides the earliest expected opportunity to buy a new car? a. The two-year bond b. The three-year bond c. The four-year bond d. The five-year bond e. None of the above 2. Assuming implied forward rates are the best estimates of future one-year rates, how many years before you can expect to pay cash for a used car if you invest in successive one-year bonds? a. One year b. Two years c. Three years d. Four years 3. What is the implied forward rate for the last year of your investment in question 2? a. 10.00% b. 12.01% c. 14.03% d. 16.05% e. None of the above 4. Compared with an investment in the five-year bond, successive investments in one-year bonds over a five-year period carry a. More credit risk b. More interest-rate risk. c. More reinvestment rate risk. d. None of the above. e. All of the above