I wonder if I understand the problem correctly? To get the interest rates we need to use the bootstrapping formula from the Hull book, but in order to do this, we need to have the discount factors from year 1-3. I do not understand where we get those from? The correct result for year one is apparently 2.9559%. Perhaps someone can help me on this?

PROBLEM 2 Consider a small fixed income market with the following swap rates: Maturity Swap rate (years) (percent) 3.0 3.5 3.8 4.2 2 (a) Calculate zero-coupon interest rates for maturities up to 4 years with continuous compo- unding. Hint: Use the bootstrapping formula