The Prices of Three Zero-Coupon Bonds Are Provided in the Table

question 11

Multiple Choice

The prices of three zero-coupon bonds are provided in the table below. All three bonds have a face value of $1,000. The three bonds have three different terms to maturity. What is the yield on the bond with 2 years to maturity? $\begin{array}{|l|l|cc|} \hline \text { Maturity } & \text {Price } & \text { Yield}\\\hline \text { 1 Year } & \$965.35 & \text {k}_1\\\hline \text {2 Year } & \$923.24& \text { k}_2\\ \hline\text {3 Year } & \$885.25& \text {k}_3\\\hline \end{array}$

• A)4.07%
• B)4.16%
• C)4.02%
• D)3.59%
• E)3.98%

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