Question: i. Two bonds both have two years to maturity, face value of $100 and pay coupons annually. The coupon rate on bond A is 3%

i. Two bonds both have two years to maturity, face value of $100 and pay coupons annually. The coupon rate on bond A is 3% and that on bond B is 8%. Bond A sells for $94.55 and bond B's price is $103.81. What are the one and two year spot interest rates that can be inferred from this information? (8 marks)

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