A newly-issued three-year bond pays an annual coupon of 3.5% at the end of each year, and will be redeemed above par at 105% at the end of the term. You are given the following additional information: - the price of the bond is 102 per 100 nominal - the 1-year spot rate of interest y is 3.75% per annum - the 2-year spot rate of interest y2 is 3.25% per annum a) Calculate to five significant figures the 3-year spot rate of interest Yz. [4 marks] b) Explain, without doing any calcul ns, how you would expect the size of the following interest rates to compare to each other: i) the forward rate f2,1 to the spot rate of interest Yz; ii) the forward rate f2,1 to the forward rate f1,2; iii) the spot rate of interest y to the forward rate f1,2- [8 marks]