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1.We know that the 6 month zero bond price is $94.9; the 1 year coupon bond price is $90.0 with semi-annual coupon rate 4: the 1.5 year coupon bond price is $96.0 with semi- annual coupon rate 8. Note that the face value of the bonds are $100. What is the annual 6 month zero rate? Please work on a continuous compounding base. 7.87% 10.47% 10.31% 8.60M 8.16 ?? ?? 10.57% 7.84% 14.65% 14.39%

2. Excel template Saved File Home Insert Formulas Data Review View Help Tell me what you want to do Comments X Cut LG Copy Arial 10 AA ab Wrap Text General ΣAutoSum 2? O Paste BI U Dab+ + Merge & Center $ % 968 28 Insert Delete Format Clear P Format Painter Conditional Format Cell Formatting as Table Styles Tables Sort & Find & Filter Select Editing Undo Clipboard Font Alignment Number Cells E5 B D E F G H ? L M N o P Q R s A 1 Required annuity payments 2 3 Retirement income today 4 Years to retirement 5 Years of retirement 6 Inflation rate 7 Savings 8 Rate of return 9 10 Calculate value of savings in 10 years: 11 Savings at t = 10 12 $60,000 10 25 6.00% $220,000 7.00% Formulas #N/A #N/A #N/A 13 Calculate value of fixed retirement income in 10 years: 14 Retirement income at t = 10 15 Calculate value of 25 beginning-of-year retirement 16 payments at t =10: 17 Retirement payments at t = 10 18 19 Calculate net amount needed at t = 10: 20 Value of retirement payments 21 Value of savings 22 Net amount needed 23 24 Calculate annual savings needed for next 10 years: 25 Annual savings needed for retirement #N/A #N/A #N/A #N/A

3.Explain the Theory of Comparative Advantage and Imperfect Markets Theory. Support with example 

4.How does a central bank mange Balance of Payments (BOP) deficit or surplus?