Part I: tram-lac questions. Write 'T' if the statement is true and 'F' if the statement is false. There are 2 points for each question and total 12 points. ' ( ) 1. For a discount bond, the yield to maturity is bigger than the current yield. ( ) 2. Because of the tax-exempt feature of municipal bonds, the yield on municipal bonds is higher than otherwise identical corporate bonds. . ( ) 3. A long position in receiver swaptioa can be used to hedge against ttme interest rate being too high. ( ) 4. An investor bought a CDS one week ago. When the market perceives that the relevant credit risk has increased, thh investor gains. ( ) 5. In a mortgage loan application, the higher the loan's payment to income ratio, the greater the likelihood that the applicant will be able to meet the required payment. ( ) 6. James will have 810,000 to lend out 'om December 2021 to March 2022. He can long December Eurodollar fut-mes to hedge interest rate risk. Part II. Essay question. (5 points) Given that the one-year spot rate is currently 2%; the expected one-year spot rate one year 'om now will be 3%; and the expected one-year spot rate two years from now will be 4%. Under the Pure ctation Theory what must today's three-year spot rate be? Assume all _ rates are e ve annual rate. - Suppose the three-year spot rate is actually 5%, how could you take advantage of this? mm f