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Problem 3 (10 points) Using the following term structure, answer the following questions Term Structure of Interest Rates Maturity (years) Yield-to-Maturity (%) 1 4% 2

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Problem 3 (10 points) Using the following term structure, answer the following questions Term Structure of Interest Rates Maturity (years) Yield-to-Maturity (%) 1 4% 2 5% 3 7% 5 8% 6% 4 A. Calculate the price and Yield-to-Maturity (YTM) of a 4-year 8% coupon bond. B. Calculate the 1-year short rate between years 1 and 2, and between years 3 and 4

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