QUESTION TWO

Yield to maturities, par values and market prices for government securities (with annual interests) are given in the following table:

Maturity (Years)	Yield to maturity	Par Value (K)	Market Price (K)
1	3%	100	101.25
2	4%	100	103.50
3	5%	100	104.25

Assuming that the yields to maturities are equal to the coupon rates, calculate the one

year, two year and three year spot rates.