An FI Manager Purchases a Zero-Coupon Bond That Has Two

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity. The manager paid $76.95 per $100 for the bond. The current yield on a one-year bond of equal risk is 12 percent, and the one-year rate in one year is expected to be either 16.65 percent or 15.35 percent. Either rate is equally probable.
-What is the yield to maturity for the two-year bond if held to maturity?

A) 27.99 percent.
B) 13.54 percent.
C) 29.95 percent.
D) 14.00 percent.
E) 11.53 percent.