Question: Problem #4: A one year zero coupon bond has an effective annual rate of 12.5%. A three year zero coupon bond has an effective annual

Problem #4: A one year zero coupon bond has an effective

Problem #4: A one year zero coupon bond has an effective annual rate of 12.5%. A three year zero coupon bond has an effective annual rate of 15.5%. If a 3 year coupon-bearing bond that pays coupons of 15.5% annually has a yield of 15.1%, what is the effective annual rate of a two year zero coupon bond? (A) 14 (B) 12.84 (C) 13.61 (D) 14.38 (E) 13.23

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