1. Consider a 2-year bond whose par value is $1,000 and coupon rate is 6% per year, payable semi-annually. The bond's current price is $1,007.91. Suppose also thatthe current term structure of spot interestrates is as follows:

Term (years)	Rate (% p.a., continuous compounding)
0.50	4.445%
1.00	4.740%
1.50	5.060%

Under the UnbiasedExpectation Hypothesis, how much do you expect the six-monthspot rate to be in 18 months from now?