Question 3 An individual is considering investing in a market with the following term structure of interest rates: - 150 invested immediately (i.e. at time t=0 ) for a period of two years will provide 170 at time t=2; - an agreement made now (i.e. at time t=0 ) to invest 120 in one year's time (i.e. at time t=1 ) for a period of one year will provide 128 at time t=2; and - an agreement made now (i.e. at time t=0 ) to invest 250 in one year's time (i.e. at time t=1 ) for a period of two years will provide 285 at time t=3. (i) Calculate, to 5 decimal places, the following rates of interest per annum effective, implied by this data: (a) The two-year spot rate at time t=0. (b) The one-year spot rate at time t=0. (c) The three-year spot rate at time t=0. [8 marks] (ii) Calculate, to 5 decimal places, the three-year par yield at time t=0 in this market. [3 marks]