1. Consider one 2-year bond in comparison to two successive 1-year bonds in a situation in which an investor buys a 1-year bond today and then another 1-year bond when the first matures.Suppose that the 2-year bond has an interest rate of 8 percent each year.

1. Calculate the amount an investor would have (future value)at the end of two years if he purchased the single 2-year bond. Show your work.

b)Now consider the pattern of interest rates on the one-year bonds listed below.

For each case below,calculate how much an investor would have at the end of two years if he

buys two consecutive 1-year bonds, investing $1,000 today. Show your work.

1. The one-year interest rate today is 7 percent; the one-year interest rate will be 9 percent one year from now.
2. The one-year interest rate today is 5 percent; the one-year interest rate will be 11 percent one year from now.
3. The one-year interest rate today is 3 percent; the one-year interest rate will be 13 percent one year from now.
4. The one-year interest rate today is 0 percent; the one-year interest rate will be 16 percent one year from now.