QUESTION 2 a) Consider a coupon bond that has a $900 par value and a coupon rate of 6%. The bond is currently selling at $860.15 and has two years to maturity. What is the bond's yield to maturity (YTM)? (2 marks) b) If a strike takes place in France, making it harder to buy French goods, what will happen to the value of the U.S. dollar? Use a graph of the foreign exchange market for dollars to illustrate the effect. (2 marks) c) Compare and contrast pure expectation theory and market segmentation theory. What are the facts of the yield curves that can be explained by these theories, respectively? (3 marks) d) During 2008, the difference in yield (the yield spread) between three-month AA-rated financial commercial paper and three-month AA-rated nonfinancial commercial paper steadily increased from its usual level of close to zero, spiking to over a full percentage point (100 basis points) at its peak in October 2008. What explains this sudden increase? Use appropriate graphs to illustrate your answer. (5.5 marks) [12.5 marks)