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I. Consider the following three government bonds: Bond Bond Price Coupon Rate Maturity X $1,034.98...

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I. Consider the following three government bonds: Bond Bond Price Coupon Rate Maturity X $1,034.98 5% 3 years Y $943 0% 1 years Z ? 0% 2 years Assume that each bond has a par value of $1,000 and that coupon payments are made annually. The first coupon payments will be made one year from today. Suppose, bond Z does not pay any coupons, but it will pay its par value of $1,000 back exactly two years from today. If the interest rate of these bonds remains constant over time; is it true that the price of bond Z will be higher than the price of bond Y? - Do you agree? Justify your opinion for or against it

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