Question: Currently, the term structure is as follows: 1 - year zero - coupon bonds yield 7 % ; 2 - year zerocoupon bonds yield 8

Currently, the term structure is as follows: 1-year zero-coupon bonds yield 7%; 2-year zerocoupon bonds yield 8%; 3-year and longer-maturity zero-coupon bonds all yield 9%. You are choosing between 1-,2-, and 3-year maturity bonds all paying annual coupons of 8%.
a. What is the price of each bond today?
b. What will be the price of each bond in one year if the yield curve is flat at 9% at that time?
c. What will be the rate of return on each bond?
Currently, the term structure is as follows: 1 -

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