Suppose the term structure of interest rates is as follows:

Term. 1 yr 2 yr 3 yr 4 yr 5 yr

Spot rate. 4.80%. 4.95% 5.15%. 5.65% 6.00%

(a) Find the present value of a 5-year annuity-due in which the first payment is $500, and each subsequent payment is $150 larger than the previous payment. Round to nearest cent.

(b) Find the price of a $1,500 par value 4-year bond with 5% annual coupons. Round the price to the nearest cent.

(c) Find the level yield to maturity of the bond in part (b). Write the yield to maturity as a percent rounded to 4 decimal places.

(d) Find the at-par yield rate for a three-year $500 bond with annual coupons. Write as a percent rounded to 4 decimal places.

(e) Determine all one-year forward rates that can be determined using these spot rates. Write each as a percent rounded to 4 decimal places.

(f) Given s7 = 7.65%, find the 3-year deferred 4-year forward rate. Write as a percent rounded to 4 decimal places.

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