Based on the quotes for German debt securities described below,

Security	Mid Price
Bund 5% 2008	101.01
Bund 4% 2009	100.00
Bund 3.5% 2010	98.35
Bund 2.5% 2011	93.88
Bund 4% 2012	98.74

Please assume that: all bonds above have an annual coupon; and no accrued interest is due for all bonds at the settlement date.

Determine:

1.1The current spot rates implied by the market.

1.2The yield-to-maturity offered by the Bund 3.5% 2010.

1.3The current duration and convexity of the Bund 4% 2009 (for both calculations just assume 1bp move).

1.4What will be the fair price for a 5-year bond of Telecom Italia (assuming an annual coupon of 6%) assuming a zero-volatility spread of +45bp.

1.5Determine the expected price for the Bund 2.5% 2011 in 2 years time.