Year #3. The following table depicts current market conditions (assume annual compounding: Current spot rates (r) Implied 2-year forward rate (f2.Je 2.30% 2.40% 5 6 2.45% 7 2.60% NA 3.20% N/A (a) Calculate implied 2-year forward rates. (b) According to your analysis on the market condition, propose a strategy that goes long a zero coupon bond and goes short another zero coupon bond. For simplicity, use only zero coupon bonds. (c) According to (b), we will go long a m-year zero coupon bond and go short a n-year zero coupon bond. From mathematical analyses, we already know that the m-year zero coupon bond outperforms the n-year zero coupon bond whenever the forward rate between the m- and n-year bond rises after 1 year. Here are our scenarios: n-year spot rates (ru) m-year spot rates (rm) x % X-0.4% y% Current State Steepeninge Parallel Shift Flattening e x + 0.3% y+0.3% x + 0.4 % x + 0.1% In which situation(s) do we make a profit from our strategy? Year #3. The following table depicts current market conditions (assume annual compounding: Current spot rates (r) Implied 2-year forward rate (f2.Je 2.30% 2.40% 5 6 2.45% 7 2.60% NA 3.20% N/A (a) Calculate implied 2-year forward rates. (b) According to your analysis on the market condition, propose a strategy that goes long a zero coupon bond and goes short another zero coupon bond. For simplicity, use only zero coupon bonds. (c) According to (b), we will go long a m-year zero coupon bond and go short a n-year zero coupon bond. From mathematical analyses, we already know that the m-year zero coupon bond outperforms the n-year zero coupon bond whenever the forward rate between the m- and n-year bond rises after 1 year. Here are our scenarios: n-year spot rates (ru) m-year spot rates (rm) x % X-0.4% y% Current State Steepeninge Parallel Shift Flattening e x + 0.3% y+0.3% x + 0.4 % x + 0.1% In which situation(s) do we make a profit from our strategy