The current prices of three U.S. treasury bonds are as follows:

Maturity Coupon Rate Price

1 0% $97.474

2 5% $99.593

3 6% $100.148

Assume that coupons are paid yearly, and all bonds have a PAR value of $100.

a. What are the 1-, 2- and 3-year spot rates?

b. What are the year 1 to 2, year 1 to 3 and year 2 to 3 forward rates?

c. What is the price of a three-year bond with an 8% annual coupon