1. Suppose you observe the following zero-coupon bond prices per $1 of maturity payment: 0.96656 (1-year), 0.92420 (2-year), 0.87605 (3-year).Compute r0(1,3), the implied forward rate for a loan made at the end of year1 and maturing at the end of year 3.

(The correct answer is 5.04. But how did they get it?)

2. Compute the convexity of a 19-year zero-coupon bond with a yield to maturity of 9.5%.

(The correct answer is 316.92. But how did they get it?)