Question One. Use the one through five year zero coupon bond rates provided in the table below to answer the following questions. Zero Coupon Bond Rates Years to Maturity Rate 1 3.05% 2 3.15% 3 3.30% 4 3.40% 5 3.45% All of the questions refer to a five-year 3.200% coupon rate bond that makes annual payments with a $100 par value.

Part Two. Calculate the value of each of the bond cash flows in five years (1) when the cash flows are reinvested at the yield to maturity and (2) when cash flows are reinvested at the current implied forward rates. Total is the sum of the five reinvested cash flow values. [ Part Three. What is the five-year annualized return (1) when the cash flows are reinvested at the yield to maturity and (2) when cash flows are reinvested at the current implied forward rates? Five Year Annualized Return Part Two. Calculate the value of each of the bond cash flows in five years (1) when the cash flows are reinvested at the yield to maturity and (2) when cash flows are reinvested at the current implied forward rates. Total is the sum of the five reinvested cash flow values. [ Part Three. What is the five-year annualized return (1) when the cash flows are reinvested at the yield to maturity and (2) when cash flows are reinvested at the current implied forward rates? Five Year Annualized Return