Currently, the term structure is as follows: 1-year zero-coupon bonds yield 7%; 2-year zerocoupon…

Currently, the term structure is as follows: 1-year zero-coupon bonds yield 7%; 2-year zerocoupon bonds yield 8%; 3-year and longer-maturity zero-coupon bonds all yield 9%. You are choosing between 1-, 2-, and 3-year maturity bonds all paying annual coupons of 8%. a. What is the price of each bond today? b. What will be the price of each bond in one year if the yield curve is flat at 9% at that time? c. What will be the rate of return on each bond?

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