1. Assume the spot rates for the next six years are given by:

s1 = 0.03, s2 = 0.0385, s3 = 0.0446, s4 = 0.0490, s5 = 0.0521, s6 = 0.0543 .

a) Compute the price of a 5.5% coupon bond (annual coupon payment) with face value $100 and maturity six years.

b) What is the quasi-modified duration of the bond?

c) Determine next years spot rates s1, s2, s3, s4, s5 according to expectation dynamics.