Question 1. The current price of a T-Bill is $925. The T-Bill will not pay any coupon; it will mature in exactly 200 days, and will pay $1,000FV.

A. Calculate The annual risk-free rate this T-Bill pays. Use continuous compounding.

B. Consider another T- Bond that will mature in 25 years. During these 25 years the T-Bond does not pay any coupons. The annual risk-free rate on this T-Bond is 5% with continuous compounding, and by the end of the 25 years the Bond will pay $1,000FVC. Calculate the current market value of this T-Bond.