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1. For yearly spot rates (7%, 8%, 9%, 10%), a) Calculate the price of a 1 year zero coupon bond and the prices 2 year,

1. For yearly spot rates (7%, 8%, 9%, 10%),

a) Calculate the price of a 1 year zero coupon bond and the prices 2 year, 3 year, and 4 year coupon bonds with 8% annual coupon payments.

b) Find the yield curve by calculating the yields of bonds in (a). Is the yield curve increasing or decreasing with respect to maturity?

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