1The following are the current prices of zero-coupon bonds that have redemption value $1000: Term to Maturity Price 1 $943.40 2 x 3 $805.08

(a) If the one year forward rate deferred 1 year is 8%, determine x.

(b) Using these interest rates, determine the price of a bond that pays annual coupons of 40 and matures to 500 in three years. answer to nearest penny

2The following are prices for zero-coupon bonds with redemption value of $1,000: Term to Maturity Price 1$943.40 2 $898.47 3 $847.62 4 $792.16 Determine the one year forward rate starting in 2 years. to the nearest percent

3In a two year interest rate swap, the oating rate for each year is determined as the one year rate at the beginning of the year, but payments are made at the end of the year. The one year spot rate is 5%, and the two year spot rate is 6%. Find the approximate xed rate for the two year swap. to four decimal places