1. Suppose that you have the following bonds:

A: 1-year zero coupon bond has a YTM of 2.2%

B: 2-year zero coupon bond has a YTM of 3.0%

C: 3-year zero coupon bond has a YTM of 3.5%

• If each of these bonds has a face value of $1000, what are the prices of each of these bonds?
• What do bonds B and C imply about the interest rate in the third year?
• If the law of one price holds, what is the fair value of a 3-year coupon bond with a 10% coupon and a face value of $1000?
• What is the duration of the 3-year bond described in part c?
• What is the YTM of the 3-year bond described in part c?