Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of $1,000 Par Bond (Zero-Coupon)
Maturity (Years) Price of $1,000 Par Bond (Zero coupon)
1 $905.55
2 $900.82
3 $846.30
a) An 5.3% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be
b) If at the end of the first year, the yield curve flattens out at 6.7%, what will be the 1-yr holding period return on the coupon bond?