Consider afive-year, default-free bond with annual coupons of 7 %

7% and a face value of $ 1 comma 000

$1,000 and assumezero-coupon yields ondefault-free securities are as summarized in the followingtable:

Maturity

1 year

2 years

3 years

4 years

5 years

Zero-Coupon Yields

6.00

6.00%

6.30

6.30%

6.50

6.50%

6.70

6.70%

6.80

6.80%

a. What is the yield to maturity on thisbond?

b. If the yield to maturity on this bond increased to 7.20 %

7.20%, what would the new pricebe?