3. (Bonds) Three Zero Coupon Bonds (ZCB) are issued on the market. They each have...
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3. (Bonds) Three Zero Coupon Bonds (ZCB) are issued on the market. They each have face value of 100 and maturity, respectively, of 1 year, 3 years and 4 years. Assume the first bond 3 is sold for 99.01, the second one for 92.86 and the third one for 88.85. (a) (3 marks) Find the annual effective yields of all three bonds. (b) (4 marks) Determine the term structure of forward rates associated with these bonds. (c) (2 marks) An investor must pay 1,500 after four years. How much do they need to put aside at the end of the first year, if they decide to invest in the market
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