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(3) The following table gives bond prices. (See formulas at the end of the exam.) Price S Maturity Years Coupon Principal 1.0 2.0 0.0 99

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(3) The following table gives bond prices. (See formulas at the end of the exam.) Price S Maturity Years Coupon Principal 1.0 2.0 0.0 99 100 99.5 100 1.0% a) Calculate zero rates with continuous compounding for the 1-year and 2-year bonds (coupon paid annually). (b) What is the 1-year forward rate from year 1 to year 2

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