Question: Given: Zero-coupon bonds (on 15 January), Face Value = $1000 Maturity 1 year 2 years 3 years 4 years 5 years Spot Rate (%) 7.0

Given: Zero-coupon bonds (on 15 January), Face Value = $1000

Maturity	1 year	2 years	3 years	4 years	5 years
Spot Rate (%)	7.0	6.5	6.0	5.5	5.5

Part A: What is the current market price of a bond maturing in 1 year? Part B: What is the current market price of a bond maturing in 2 years? Part C: What is the current market price of a bond maturing in 3 years? Part D: Suppose you buy a 5-year bond. What price do you pay? Also now assume that you believe in the unbiased expectations theory of the term structure of interest rates. If you intend to sell your five year bond at the end of three years, what price will you expect to sell it for?

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