Question: b) What is the 2-year spot rate? (0.5 marks) Enter your answer to 4 decimal places eg if your answer is 6.54% enter as 0.0654.You

b) What is the 2-year spot rate? (0.5 marks) Enter your answer to 4 decimal places eg if your answer is 6.54% enter as 0.0654.You observe the trading price of the following zero coupon bonds: Maturity Price 1 $96.15 2 $90.2? 3 $83.96 Wd that the pure yield curve is flat into perpetuity from year 3 onwards. There is also a perpetuity in the market that pays an annual 10% coupon and is trading on a 6. yield. All ponds trading in the market have a lace value of $1 {10. You are faced with the following two liabilities: 1] A one-off $1362.48 payment due in 4 years time 2] A one-oil $1,898.30 payment due in 11 years time You wish to immunize your interest rate risk. This question [parts a - m] is worth 15 marks in total. For each part, if you enter the correct answer you will receive full marks [even if you don't show working). If you choose to show working (either typed into the space provided or as one handwritten PDF file in Question 66], and get the answer incorrect, you my receive part marks. If you simply enter the incorrect answer and do not show working, you will not receive any part marks

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