Assume you observe the zero interest rate curve in the table below at t = 0, (a) What are the zero rates at each maturity assuming annually com- pounded? (b) What is the forward rate for the 1-year period beginning in 1 to 9 years with annual compounding? (e.g ly forward starting ly, 2y forward start ly...) (c) A 5-year bond settles today with an annually fixed coupon payment is priced at par, what is the coupon rate? (d) If the interest rate curve goes up by 100bps instantly, what happens to the bond price in (c)? Tro(T) 5.0% 5.2% 1 2 5.3% 5.4% 5.5% 5.5% 5.6% 5.6% 9 5.6% 10 5.5% Table 1: Continuously Compounded Zero Spot Curve Observed at t = 0, 3 4 5 6 7 8 (e) Price a 2-year forward rate agreement (FRA) which pays 5% on 1,000,000 notional and expires in 5 years. (f) Price a 10-year 1,000,000 notional fix-floating interest rate swap which pays 5% fix coupon and receives floating rate (both fix and floating leg pay annually )?