5. A one-year Treasury bill has a yield of 6%. A bond will pay $70 at the end of year 1 and $1,070 at the end of year 2. If its market value is $1,036.50, the two-year spot rate is: (a) 6%. (b) 9%. (c) 7%. (d) 5%. (e) 8%. 7. The spot rate for year 1 is 7.5% and the forward rate for year one to two is 8%. The two-year discount factor is: (a) 0.845. (b) 0.861. (c) 0.852. (d) 0.888. (e) 0.874 one-year Treasury bill has a yield of 6%. A bond will pay $70 at the end of year 1 and $1,070 at the end of year 2. If its market value is $1,036.50, the two-year spot rate is: (a) 6%. (b) 9%. (c) 7%. (d) 5%. (e) 8%. 13. The one-year spot rate is 5% and the two-year spot rate is 7%. An investor adopts the strategy of investing for one year and will reinvest for the second year. Under unbiased expectations theory, he or she must expect that (a) the one-year forward rate for years 1 to 2 will be above 9%. ????????????????????????????? (b) the two-year spot rate is too high. (c) the inflation rate will drop more than the market expected. (d) the one-year forward rate for years 1 to 2 will be at least 7%. (e) the yield curve will have a negative slope. 17. If investors feel that half of the time future spot rates will rise and half of the time they will decline, the liquidity preference theory (a) shows the average yield curve will be flat. (b) does not explain the declining yield curve situation. ????? (c) supports most yield curves will be declining. (d) is not valid. (e) suggests there will be most upward sloping yield curves