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  3. b. the price of a 1-year zero coupon bond is 98% o

b. The price of a 1-year zero coupon bond is 98% of the face value,...

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b. The price of a 1-year zero coupon bond is 98% of the face value, the prices of corresponding 2-year and 3-year zero coupon bonds are 95% and 92%, respectively. Calculate the one and two year spot rates and the forward rate, f13, between years 1 and 3. You are offered an opportunity to borrow $1m in year 1 (one year from now). The loan requires annual coupon payments of 3% of $1m in years 2 and 3, and you must repay the capital of $1m in year 3. Should you accept this offer

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