Question 2 (20 marks) a) (2 marks) Please retrieve the following zero rates from the Bank of Canada's web- site (https://www.bankofcanada.ca/rates/interest-rates/bond-yield- curves/) and use the data for the zero yield curve dated September 25th, 2019: Term to maturity Rate(%) Term to maturity Rate(%) (years) 1 (years) 6 2 7 3 8 4 9 5 10 b) (5 marks) Using the zero rates retrieved in part a), compute the par yield curve. c) (5 marks) Using the Government of Canada bond yields as of September 25th, (https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/), compare your par curve yield rates, for the 2, 3, 5, 7 and 10 year maturity terms. What can you conclude? d) (3 marks) Assume a closing bid side yield to maturity of 1.432% for the on-the -run 5 year bond (GoC 1.50% due Sept. 1, 2024). Using this yield to maturity, calculate the bonds' clean and dirty price as of September 25th (settlement date of September 27th for this bond). Note: this is a semi-annual pay bond e) (5 marks) Using the Bank of Canada zero coupon rates from September 25th, calculate the theoretical arbitrage free price of the 5 year GoC 1.50% due Sept. 1, 2024. What do you observe when you compare it to the full price of the bond calculated in part d? Why is this the case? Note: this is a semi-annual pay bond so adjust the zero rates accordingly. As well, the Bank of Canada model will use Sept. 27th as the settlement date for the zero rates as of September 25th.