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You have a zero coupon bond that pays $100 in two more years. Its price is $69.44. You also have a 5% coupon bond with

You have a zero coupon bond that pays $100 in two more years. Its price is $69.44. You also have a 5% coupon bond with a principal of $100. The spot rate for 1 year is r1 = 5%. (a) What is the spot rate for 2 years, r2? (b) What is the price of the coupon bond? (c) Make a graph to show the term structure of interest rates.

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