4. You are given the following term structure for interest rates.

    Term Annual Spot Interest Rates 1 7% 2 8% 3 9% 

5. 1. (Please do not use excel)

   2. (a) Compute the one year forward rates on [0,1], [1,2], and [2,3].

   3. (b) A bond has par amount 1000, term to maturity 3 years, and annual coupon rate 6% payable annually. Assume the above term structure is correct. Calculate the value of the bond at t = 0.

   4. (c) Calculate the annual effective yield-to-maturity for the bond if the bond is sold at a price equal to its value.