Holding-period return on the coupon bond

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Reference no: EM132058206

Below is a list of prices for zero-coupon bonds of various maturities.

Maturity (Years) Price of $1,000 Par Bond (Zero-Coupon)

1 $945.80

2 877.23

3 803.34

a. An 4.8% coupon $1,000 par bond pays an annual coupon and will mature in 3 years.

What should the yield to maturity on the bond be? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Yield to maturity %

b. If at the end of the first year the yield curve flattens out at 8.4%, what will be the 1-year holding-period return on the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Holding-period return %

Reference no: EM132058206

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