Term structure of interest rates. arbitrage argument to explain how forward rates are derived from the spot-rate curve Use an 6.3% and s26.9% what is the If the spot rates for 1 and 2 years are S1 forward rate (f1,2) for yearsl to 2? Show that if the spot rate curve is flat, (i.e. s(t) rates are also equal to r. r for all t) then all forward = C Consider two 5-year bonds: one has a 9% coupon and sells for 101, the other has a 7% coupon and sells for 93.20. Both have a face value of f100. What is the fair price for a five year zero-coupon bound with a face value of f100? Describe how duration and convexity are used to reduce the risks associated with bonds? The five parts carry, respectively, 15%, 10%, 25%, 25%, and 25% of the marks