All sub-questions a) - m) relate to the following information:

You observe the trading price of the following zero coupon bonds:

Maturity	Price
1	$96.15
2	$90.27
3	$83.96

Importantly you have been told that the pure yield curve is flat into perpetuity from year 3 onwards.

There is also a perpetuity in the market that pays an annual 10% coupon and is trading on a 6% yield.

All bonds trading in the market have a face value of $100.

You are faced with the following two liabilities:

1) A one-off $1,262.48 payment due in 4 years time

2) A one-off $1,898.30 payment due in 11 years time

You wish to immunize your interest rate risk.

This question (parts a - m) is worth 15 marks in total.

For each part, if you enter the correct answer you will receive full marks (even if you don't show working). If you choose to show working (either typed into the space provided or as one handwritten PDF file in Question 66), and get the answer incorrect, you may receive part marks. If you simply enter the incorrect answer and do not show working, you will not receive any part marks.

a) What is the 1-year spot rate? (0.5 marks)

Enter your answer to 4 decimal places eg if your answer is 6.54% enter as 0.0654.

b) What is the 2-year spot rate? (0.5 marks)

Enter your answer to 4 decimal places eg if your answer is 6.54% enter as 0.0654.

c) What is the 3-year spot rate? (0.5 marks)

Enter your answer to 4 decimal places eg if your answer is 6.54% enter as 0.0654.