You observe that the current three-year discount factor for default-risk free cash flows is 0.68. Remember, the t-year discount factor is the present value of $1 paid at time t, i.e. dt = (1 +r)-t, where rt is the t-year spot interest rate (annual compounding). Assume all bonds have a face value of $100 and that all securities are default-risk free. All cash flows occur at the end of the year to which they relate. In addition to the bond in (a), you observe the following: a 2-year coupon bond paying 10% annual coupons with a market price of $97, and two annuities that are trading at the same market price as each other. The first annuity matures in 3 years and pays annual cash flows of $20, while the second annuity pays annual cash flows of $28 and matures in 2 years. Using this information: i. Complete the term structure of interest rates, i.e. determine the one- and two-year discount factors, di and d2, respectively. (6 marks) ii. Determine the price of the annuities. (2 marks) You observe that the current three-year discount factor for default-risk free cash flows is 0.68. Remember, the t-year discount factor is the present value of $1 paid at time t, i.e. dt = (1 +r)-t, where rt is the t-year spot interest rate (annual compounding). Assume all bonds have a face value of $100 and that all securities are default-risk free. All cash flows occur at the end of the year to which they relate. In addition to the bond in (a), you observe the following: a 2-year coupon bond paying 10% annual coupons with a market price of $97, and two annuities that are trading at the same market price as each other. The first annuity matures in 3 years and pays annual cash flows of $20, while the second annuity pays annual cash flows of $28 and matures in 2 years. Using this information: i. Complete the term structure of interest rates, i.e. determine the one- and two-year discount factors, di and d2, respectively. (6 marks) ii. Determine the price of the annuities. (2 marks)