june 2017, toltuck co.

Toltuck Co has issued an 8% bond, which has a face or nominal value of $100 and a premium of 2% on redemption
in three years’ time. The coupon on the bond is payable on an annual basis.
The government of Arumland has three bonds in issue. They all have a face or nominal value of $100 and are all
redeemable at par. Taxation can be ignored on government bonds. They are of the same risk class and the coupon
on each is payable on an annual basis. Details of the bonds are as follows:
Bond Redeemable Coupon Current market value
$
1 1 year 9% 104
2 2 years 7% 102
3 3 years 6% 98
Credit spreads, published by the credit agency, are as follows (shown in basis points):
Rating 1 year 2 years 3 years
AA 18 31 45
BBB 54 69 86
how to calculate the yield curve?