1. You observe that the asked price on US Treasury Strips with maturities one year from today, two years from today and three years from today are 98.031, 95.156 and 91.500 respectively.
a. What is the value of a 3-year, risk-free bond with a coupon rate of 3% (annual coupons) and a face amount of $1,000?
b. What are the implied forward rates in the 2nd and 3rd years?
c. What are the yields to maturity on these three US Treasury Strips?