Question 2 A 4-year zero coupon bond has a face value of $100 and a price of $85.480. The table below contains prices, coupons and time to maturity for 3 annual coupon paying bonds that have a face value of $100. Time to Maturity (Years) Annual Coupon Price 1 3.0% $99.038 2 8.5% $108.487 3 6.5% $106.937 Please use 3 decimal places in your working. 2a) What is the price of a 3-year bond paying annual coupons of 4% and a face value of $100? (15 marks) 2b) If you had $1million invested in the 3-year 4% coupon bond, how many of the 4-year zero-coupon bonds would you need to short-sell to hedge your interest rate risk? (15 marks)