1. 5-year Treasury bonds yield 6.9%. The inflation premium (IP) is 2.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.9%. What is the real risk-free rate, r*? (Round your answer to 1 decimal place.)

2. Noncallable bonds that mature in 8 years were recently issued by Sternglass Inc. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 7%, at what price should the bonds sell? (Round your answer to 2 decimal places.)