b) How do swaps work and what are the advantages of entering into a swap? c) Suppose you observe the following three bonds. Assume that all bonds are denominated at $100 face value per contract and that they pay their coupons annually. Bond A Bond B Bond C Price 111.42 108.33 116.61 Coupon 15 15 15 Maturity (years) 3 2 1 i) Compute the spot rates ro,1, 10,2 and r0,3. ii) Compute the forward rates 11,2 and 12,3. b) How do swaps work and what are the advantages of entering into a swap? c) Suppose you observe the following three bonds. Assume that all bonds are denominated at $100 face value per contract and that they pay their coupons annually. Bond A Bond B Bond C Price 111.42 108.33 116.61 Coupon 15 15 15 Maturity (years) 3 2 1 i) Compute the spot rates ro,1, 10,2 and r0,3. ii) Compute the forward rates 11,2 and 12,3