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Suppose the one year spot rate and two year spot rate are both 3%. a) What is the price of a two year ZCB? b)

Suppose the one year spot rate and two year spot rate are both 3%.

a) What is the price of a two year ZCB?

b) What is the price of a one year ZCB today?

c) What do I expect the price of a one year ZCB to be, one year from now?

Same 3 questions except now the one year spot rate is 3% and the 2 year spot rate is 4%.

Same 3 questions except now the one year spot rate is 3% and the 2 year spot rate is 2%.

ZCB-zero coupon bond

explain in full detail with correct formulas

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