1. (Zero-rate curve) Assume that there is no arbitrage opportunity on the bond market. Consider three bonds A, B, C with the following cash flows:

Bond P0 C1 C2 C3

A 108 8 108

B 106 4 4 104

C 94.8 100

Find the zero-rates.

(Zero-rate curve) On the market investors can buy and sell:

Bond A maturity: 1 year, zero-coupon, price: e97.

Bond B maturity: 2 years, constant annual coupon, yield: 4%, price: e100.

Bond C maturity: 3 years, annual coupon: 4%, price: e95. Calculate the 1-, 2-, 3-year zero rates.