The following is a list of prices for zero-coupon bonds of various maturities.
year price of bond
1 961.54
2 907.03
a) What is the yield to maturity of an 8% coupon bond with 2 years to maturity? Assume annual coupon
b) If the Liquidity Preference Theory is accepted, assume that the liquidity premium is 1% for all maturities what are
-the expected price of the coupon bond at the end of the first year
-the expected holding-period return on the coupon bond over the first year?