Suppose the current yield on a one-year, zero coupon bond is 3%, while the yield on a

Question:

Suppose the current yield on a one-year, zero bond is 3%, while the yield on a five-year, zero bond is 5%. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not rise above what level?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...