Based on the current yield curve, a risk-free 3-year 10% annual coupon bond is issued today (i.e., to mature at the end of Year 3). You buy the coupon bond at the issuance, and reinvest the coupons until the end of year 2, and resell the bond at the end of Year 2. Assume that the expectations theory of term structure of interest rates holds. Calculate the price of the coupon bond at the issuance and the Realized Compound Yield for the investor over the two-year period.

The following is a list of yields to maturity for one-year, two-year, three-year, and four-year risk-free zero-coupon bonds. Maturity (Years) Yield to Maturity y = 3% 2 y2-4% 3 y3 =6% 4 y4=7%