a.) Reconsider bond B from class notes (the 2-year maturity bond paying a 5% annual coupon).If it sells for $100.20, what is its static spread? (Remember that the pure or "stripped" yield curve is 4% at 1 year and 4.5% at 2 years.)Use Excel and Goal Seek to answer this question.Express the static spread as a decimal, not a percentage.You should find that the spread is positive (why?)

b.) Now assume the bond sells for $101.80.What is the static spread (as a decimal)? Why is it now negative?

c.) Now turn to Bond C, the 2-year callable bond.Use Goal Seek to find its OAS if its price is $100.05, a bit less than we found in class.Express your answer (which should be positive) as a decimal.(Remember that either interest path is equally likely.)