The annual effective forward rate applicable over the period from t tot +r is defined as ft.r where t and r are measured in years. If f0,1 = 8%,f1,1 = 7%, f2,1 = 6% and f3,1 = 5%. Calculate the yield rate at the issue date for a 4-year bond, redeemable at par with 5% coupon payable annually. i) ii) Briefly explain why the yield rate from the 4-year bond is higher compared to the 4-year forward rate given f3,1 = 5%