Question: How to solve this problem?please write the solution specifically. A 3 year UK government gilt (bond) with a face value of 1000 and an annual

How to solve this problem?please write the solution specifically.

A 3 year UK government gilt (bond) with a face value of 1000 and an annual coupon rate of 3% is currently priced at 1020. A 10 year UK government zero coupon gilt with a face value of 1000 is currently priced at 750. The one year spot rate is 2% and the two year forward rate is 2.5%. (a) What is the 3 year spot rate? (b) What is the 10 year spot rate? (c) An investor believes that interest rates will fall to an annual 1% in year 4 and that the yield curve will flatten so that the forward rates for all years between years 4 and 10 will be 1%. How can she profit from this belief and how much profit would she make if her belief is correct? You may assume that the investor can buy fractions of a bond and that she is able to borrow at the risk free rate

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