1. Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:

₁R₁ = 4%, E(₂r₁) = 5%, E(₃r₁) = 5.6%, E(₄r₁) = 5.95%

Using the unbiased expectations theory, calculate the current (long-term) rates for 1-, 2-, 3-, and 4-year-maturity Treasury securities. (Round your answers to 2 decimal places.)

2.

A 3.125 percent TIPS has an original reference CPI of 185.7. If the current CPI is 211.0, what is the par value and current interest payment of the TIPS? (Do not round intermediate calculations and round your final answers to 2 decimal places.)

3.

Compute the price of a 5.7 percent coupon bond with 15 years left to maturity and a market interest rate of 9.2 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.)