Response to the following questions:
1. Arthur purchased a zero-coupon bond on January 1, 1990 for $500. On December 31, 2001, Arthur sold this bond for $750. What was the yield on this investment?
2. Consider a bond that has a current value of $1,081.11, a face value of $1,000.00, a coupon rate of 10% (paid semiannually) and five years remaining to maturity.
a. What is the bond's yield-to-maturity today?
b. If the bond's yield does not change, what is its value one year from today?
c. If the bond's yield does not change, what is its value two years from today?