Your corporate research team has come up with the following zero-coupon yields: Maturity 1 year 2 years 3 years 4 years Zero-coupon yield to maturity 3.50% 4:00% 4.5% 4.75%

Given the information provided in this table and assuming a $1,000 face value: What is the value of a 3-year coupon bond with 4% annual coupons?

Which of the following bonds has the highest yield to maturity: A 3-year coupon bond with 4% annual coupons or a 3-year coupon bond with 10% annual coupons? All of these bonds are default free. Why? (SHOW WORK)