1. Consider Treasury securities with $100 par values. Currently, the price of 12 -miont Treasury bills is $96. The price of a 2-year Treasury note with 5% coupon rate and annual coupon payment is $98. Use continuous compounding. (a) What is the current 1-year spot rate? (b) What is the current 2-year spot rate? (c) What is f(1,2), the current forward rate of borrowing over a 1-year period, starting at 1 year from now? (d) Using the forward rate you found, and assuming the Expectations Hypothesis is valid, what is the market's expected price of the Treasury note in 1 year from now? (Hint: after 1 year, this 2-year Treasury note will become a 1-year zero-coupon bond.)