You have the following two bonds available for trade:

1-year, 3% coupon bond, priced at $98.10out of$100 par.

2-year,7% coupon bond, priced at $101.00out of$100 par.

1.Bootstrap the term-structure of interest rates using these two securities.(This means you are asked to compute the discount factors and the spot rates.)

2.Compute the forward rate from year 1 to year 2.

3.Compute the fair market value for a 2-year8% coupon bond with a par value of$100.

4.Find the yield to maturity of the bond in Q.3.

5.A corporate treasurer subject to the same yield curve as above wishes to issue a two-year bond with its fair value identical to par. What must she choose as the couponrate for this bond to achieve her objective