Question: Question 1 (4 marks) You are given the following selected values from a yield curve: Term 1 year 2 years 3 years 4 years Spot

Question 1 (4 marks) You are given the following selected values

Question 1 (4 marks) You are given the following selected values from a yield curve: Term 1 year 2 years 3 years 4 years Spot rate 7.00% 8.00% 8.75% 9.25% 9.50% 5 years (a) Calculate the present value of an annuity-immediate of $1000 over 5 years. (b) Suppose that two payments have been made. The interest rates immediately after the two pay- ments have been made are 1% higher for all periods than the spot rates at time 0. Find the present value of the remaining payments

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