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An insurance company invests in two $100 par value bonds with 5% annual coupons and each maturing at par. The one year spot rate is

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An insurance company invests in two $100 par value bonds with 5% annual coupons and each maturing at par. The one year spot rate is 2.00%. The price and term of each bond is as follows: Bond I: Term 2 years, price = 103.87 Bond II: Term 3 years, price = 104.32 Let sy be the 2 year spot rate and s3 be the 3 year spot rate implied by those bond prices. Calculate 52 +53. A 6.5% B 5.3% 2.3%

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