Question: Type or paste question here 2. At time 0, the term structure of effective annual yield rates for zero coupon bonds is given as follows:

Type or paste question here 2. At time 0, the term structure Type or paste question here

2. At time 0, the term structure of effective annual yield rates for zero coupon bonds is given as follows: 1- and 2-year maturity: 8% 3- and 4-year maturity: 10% (a) Determine the price of a 4-year annual coupon bond with face amount 100 and coupon rate 6%. (b) You are given that the price of a 5-year annual coupon bond with face amount 100 and coupon rate 6% is 80. Determine the forward effective annual interest rate for the period from time 4 to time 5, i.e., f[4, 5]. (c) A lender offers to lend you 1000 for one year at rate 12% starting two year from now. Construct transactions that provide an arbitrage gain and give the amount of the gain

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