What are the two- and three-year spot rates

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The one-year spot rate is 2%; the one-year forward rate from year 1 to 2 is 3%; and the one-year forward rate from year 2 to 3 is 4%. All rates are compounded, and coupons paid, annually.

(a) What are the two- and three-year spot rates?

(b) What is the price of a three-year coupon bond with an annual coupon rate of 4% and a face value of $100?

(c) The yield to maturity of this bond is 2.97%. What is its duration?

Reference no: EM132185148

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