The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Calculate the interest rate offered by each of these strips.

Years to Maturity Price, % 1 97.652% 2 94.151 3 90.344 4 86.280

a.

What is the 1-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Interest rate %

b.

What is the 4-year rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Interest rate %

c. Is the yield curve upward-sloping, downward-sloping, or flat?

Upward-sloping Downward-sloping Flat

d. Is this the usual shape of the yield curve?

Yes No