You want to invest your money in zero coupon bonds for the next two years. You find two alternative investments below...Which option would you opt for?
Option 1: Put your money in a 2-year bond with a YTM of 8.995% and par value $1000.
Option 2: Put your money in:
From t=0 till t=1 in a 1 year bond with a YTM of 8% and par value of $1000
From t=1 till t=2, roll the proceeds in another 1 year bond with a YTM of 10% and par value of $1000.