The current market price of a one-year discount bond with a face value of $100 is $ 89.28. Also, the current market price of a two year 25% coupon bond

with a face value of $2000 is $2101.44. (12 points)

a) Draw the timeline associated with each bond.

b) Determine the spot rates between year 0 and year 1 (1) and between year 1 and year 2 (2).

c) Use 2 from part b) to determine the price of a two year discount bond with a face value of $4600.