1. The following are the current prices of $1,000 zero-coupon bonds: Term Price

1 943.4

2 X

3 811.74

4 792.16

a.) If the one-year forward rate for year 2 (i.e., the one-year effective rate during year 2) is 8%, determine X.

b.) Determine the one-year forward rate for year 3 (i.e., the one-year effective rate during year 3)