1) If a pure discount three-year bond sells for $782 and a pure discount four-year bond sells for $733, what is the expected 12-month interest rate in three years time? Both have a face value of $1000.

2) If 12-month interest rates are expected to be 6% in three years time, describe how investors could take advantage of the pricing in question 1. What impact would this have on interest rates?

Please solve both the questions.Answer to first question is 6.68% p.a