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 %