Question: Problem 1 (Required, 30 marks) The following table shows the market information of 3 coupon bonds available in market. Bond term Face value Annual coupon

Problem 1 (Required, 30 marks) The following table shows the market information of 3 coupon bonds available in market. Bond term Face value Annual coupon Annual rate effective yield (frequency) rate Bond A 2 years 100 3% (annual) 2.34927% Bond B 2 years 100 4% (annual) 2.34905% Bond C 3 years 100 3% (annual) 2.49511% Bond D 3 years 100 2.5% (annual) ?? (a) Find the 1-year spot rate, 2-year sport rate and 3-year spot rate. (b) Using the above information, calculate the annual effective yield rate of bond D. (Hint: Think about all possible approach in calculating the bond price.)

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