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For each of the following pairs of Treasury securities​ (each with $ 1 comma 000 par​ value), identify which will have the higher​ price: a. A​ three-year zero-coupon bond or a​ five-year zero-coupon​ bond? b. A​ three-year zero-coupon bond or a​ three-year 4 % coupon​ bond? c. A​ two-year 5 % coupon bond or a​ two-year 6 % coupon​ bond?

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Answer:

Step-by-step explanation:

A. The three-year zero coupon bond, because the future value is receiver sooner, thus the present value is higher.

B. The three year 4% coupon bond because it pays interest payments, whereas the zero coupon bond is pure discount bond.

C. The 6% coupon bond because the coupon (interest) payments are higher.

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