8.1. The following are the current prices of zero-coupon bonds that have redemption value $1000:

Term to Maturity Price

1 $943.40

2 x

3 $805.08

(a) If the one year forward rate deferred 1 year is 8%, determine x. (b) Using these interest rates, determine the price of a bond that pays annual coupons of 40 and matures to 500 in three years.

8.2. The following are prices for zero-coupon bonds with redemption value of $1,000: Term to Maturity Price

1 $943.40

2 $898.47

3 $847.62

4 $792.16

Determine the one year forward rate starting in 2 years.