# Answer to Question #70548 in Finance for Nick Mango

Question #70548

The yields to maturity on five zero coupon bonds are given below:

Years to Maturity: 1 year (yield of 12%), 2 years (yield of 14%), 3 years (yield of 15%), 4 years (yield of 15.5%), and 5 years (yield of 15.7%)

(a) What is the implied forward rate for the third year?

(b) What is the yield to maturity of a 5-year annual coupon bond with a coupon

rate of 5%. Also, find the yield to maturity of a 5-year annual coupon bond

with a coupon rate of 10%. Which one is higher, why?

Years to Maturity: 1 year (yield of 12%), 2 years (yield of 14%), 3 years (yield of 15%), 4 years (yield of 15.5%), and 5 years (yield of 15.7%)

(a) What is the implied forward rate for the third year?

(b) What is the yield to maturity of a 5-year annual coupon bond with a coupon

rate of 5%. Also, find the yield to maturity of a 5-year annual coupon bond

with a coupon rate of 10%. Which one is higher, why?

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