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Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows:
Maturity (years) 1 2 3 4 5
Yield to Maturity 4.81 % 5.18 % 5.50 % 5.77 % 5.90 %
a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond?
b. What is the price per $100 face value of a 4-year, zero-coupon, risk-free bond?
c. What is the risk-free interest rate for a 4-year maturity Note: Assume annual compounding.?
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