1.1) You have estimated spot rates as follows: r = 5.00%, r2 = 5.40%, 13 = 5.70%, 14 = 5.90%, rs = 6.00%. where is the discount rate for year i. a. What are the discount factors for each date (that is, the present value of $1 paid in year (i.e. consider cash flow of $1 dollar per year for the next 5 years)? Using these rates, calculate the PV of the following bonds assuming annual coupons and face values of $1,000: (0) 4% coupon rate, 1-year bond; and (ii) 8% coupon rate, 5-year bond. (5 marks) b. Which bond would you purchase if the economic condition has been volatile? why? Critically discuss your