Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (assume annual coupons):

Maturity (in years)	Price	Coupon rate
1	999	T-bill (zero coupon bond)
2	1003	2%
3	1008	3.5%

a. Construct the term structure of interest rates for these three years.

b. Your company plans to issue three-year maturity bonds. You plan to issue bonds priced at $1005. At what level should you plan to set the coupon on your bond to justify this price?

Show work, Formulas and work