The one-year, two-year and three-year spot rates are 5.5%, 5.1% and 4.9%, respectively.a) What is the price of a bond with three years to maturity if the coupon rate is 4%? What is the price of a zero-coupon bond with three years to maturity?What is the effective interest rate for the zero-coupon bond and why are zero-coupon bonds always at a discount?Explain briefly, without making any calculations, whether the effective interest rate for the coupon bond is higher or lower than the effective interest rate for the zero-coupon bond.Given that the expectation hypothesis holds, what does the market expect the one-year spot rate to be in one and two years?

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The oneyear twoyear and threeyear spot rates are 55 51 and 49 respectively What is the price of a bond with three years to maturity if the coupon rate ... View the full answer