Assume that a 1-year zero coupon bond with a face value of $100 is currently selling for $94.34, while a 2-year zero coupon bond is selling for $84.99. You are considering purchasing a bond with a 2-year maturity that pays annual coupons. The face value of the bond is $100 and the coupon rate is 12% per year. 

(a)  What is the yield to maturity from zero to 2 years? 

(b) What is the yield to maturity of the 2-year coupon bond? 

(c) Under the expectations hypothesis, what is the expected price of the coupon bond at the end of the first year?

Answer rating: 100% (QA)

a To calculate the yield to maturity YTM from zero to 2 years you can use the following formula YTM ... View the full answer