Suppose the current forward curve for one-year rates is the following:

Time Period Forward Rate

f(0,1) 2.5%

f(1,1) 3.6%

f(2,1) 4.5%

f(3,1) 5.1%

1. Calculate the spot rates for 2-year, 3-years and 4-year spot rates

2. Calculate the forward rates f(1, 2), f(1, 3), and f(2, 2)

3) Use the information to value a 4-year bond that pays 4.5% annual coupons.