Question: Problem 4 : Zero - coupon vs Coupon A zero - coupon bond with maturity 1 year and face value $ 1 0 0 currently

Problem 4: Zero-coupon vs Coupon
A zero-coupon bond with maturity 1 year and face value $100 currently sells for $94.34. A zerocoupon bond with maturity 2 years and face value $500 currently sells for $462.25.
1. Estimate the yield to maturity of the 1-year zero-coupon bond.
2. Estimate the yield to maturity of the 2-year zero-coupon bond.
3. Using the yields you estimated in (1) and (2), price a 2-year coupon bond with F = $800 and
c =5%(paid annually).
4. Is the yield-to-maturity of the coupon bond above, below or exactly 5%?

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