The (zero coupon) U.S. treasury strip maturing in one year is selling at an annual yield to maturity of 1.20 percent, which is equivalent to a price of 98.814 percent of its $1000 par value. The (zero coupon) U.S. Treasury strip maturing in three years is priced at 90.456 percent of its $1000 par value, with an annualized yield to maturity of 3.40 percent. The interest payments for coupon-paying bonds occur annually (once a year) at the end of each year and bond yields are quoted as annualized interest rates (ignore semi annual compounding). Assuming that the forward interest rate for a one-year period that begins in one year is 3.61 percent,

a. determine the yield to maturity for a risk-free zero coupon bond having a par value of $1000 that matures in two years,

b. determine the current price and yield to maturity for a risk-free U.S. Government bond with 3 years to maturity, a par value of $1000 and a coupon rate of 7.5 percent.