Consider the following interest rates on four zero-coupon bonds.

Maturity (years)	Spot rate
1	6.0%
2	6.5%
3	7.0%
4	7.5%

What is the forward rate for a two-year loan beginning one year from now?

	A.	6.75%
	B.	6.50%
	C.	7.50%
	D.	7.75%

Three bonds were issued by the same company about four years ago. The three bonds have similar maturities and coupons. Bond A is callable, Bond B is putable, and Bond C is option-free.

Statement 1: If interest rates decline, Bonds B and C will have higher market prices than Bond A.

Statement 2: If interest rates increase, Bonds A and C will have higher market prices than Bond B.

	A.	Both statements are correct.
	B.	Both statements are not correct.
	C.	Only statement 1 is correct.
	D.	Only statement 2 is correct.