The annual yield to maturity for the 6-month and 1-year Treasury bill is 3.66% and 4.24%, respectively. These yields represent the 6-month and 1-year spot rates. Also assume the following Treasury yield curve (price for each issue = 100) has been estimated for 6-month periods out to a maturity of 3 years:

Years to Maturity / Annual Yield to Maturity

Years to maturity	Annual yield to maturity
1.5	4.8%
2.0	5.2%
2.5	5.66%
3.0	6.09%

(i) Compute the 1.5-year, 2-year, 2.5-year, 3-year, 3.5-year, and 4-year spot rates.

(ii) Find the arbitrage-free price of the bond.

(iii) Demonstrate that the 6-month forward rate six months from now is the rate that will produce at the end of one year the same future dollars as investing either (1) at the current 1-year spot rate of 4.24% or (2) at the 6-month spot rate of 3.66% and reinvesting at the 6-month forward rate six months from now.