Using information in Table 1, suppose you buy a 3-year par coupon bond and hold it for 2 years, after which time you sell it. Assume that interest rates are certain not to change and that you reinvest the coupon received in year 1 at the 1-year rate prevailing at the time you receive the coupon. Verify that the 2-year return on this investment is 6.5%.

YTM	Zero-coupon bond yield	Zero-coupon bond price	One-year implied Forward rate	Par coupon	Continuously compounded Zero Yield
1	6%	0.943396	6%	6%	5.82689%
2	6.5%	0.881659	7.00236%	6.48423%	6.29748%
3	7%	0.816298	8.00705%	6.95485%	6.76586%