Problem 3 Part A Suppose that the 1-year interest rate today is 3% pa and that 6 months from now you will observe the following interest rates 9-month interest rate is 2.5% pa 6-month interest rate is 2% pa 3-month interest rate is 1.5% pa and that 3 months from now you will observe the following interest rates 9-month interest rate is 3.5% pa 6-month interest rate is 3% pa 3-month interest rate is 2.5% pa 1. What would be the price of a 1-year zero coupon bond with par-value of 100S issued today on the primary market? 2. What would be the price of the bond six months from now? 3. Compute the yield-to-maturity of such bond today and 6 months from now 4. Will the price of this bond be below par, at par or above par 3 months from now? Problem 3 Part A Suppose that the 1-year interest rate today is 3% pa and that 6 months from now you will observe the following interest rates 9-month interest rate is 2.5% pa 6-month interest rate is 2% pa 3-month interest rate is 1.5% pa and that 3 months from now you will observe the following interest rates 9-month interest rate is 3.5% pa 6-month interest rate is 3% pa 3-month interest rate is 2.5% pa 1. What would be the price of a 1-year zero coupon bond with par-value of 100S issued today on the primary market? 2. What would be the price of the bond six months from now? 3. Compute the yield-to-maturity of such bond today and 6 months from now 4. Will the price of this bond be below par, at par or above par 3 months from now