Consider the following schedule of spot rates for zero coupon bonds. The face value per bond is $100,000. Maturity 1 year 2 years 3 years 4 years 5 years Spot rate (%) 6.5 6.0 5.5 5 4.0

a) You are a bond portfolio manager. You buy $10 million 5-year zero-coupon bonds (today), but plan to sell them in 1 years time.

b) What price do you expect to receive for your bond when you are selling? (1 Mark).