Which of the following financial instruments is a money market security?

		Corporate Bonds
		Common Stock
		Federal Funds
		Mortgages
		U.S. Treasury Notes

Suppose we observe the following rates: ₁ R ₁ = 6%, ₁ R ₂ = 8.5%, and E( ₂ r ₁) = 10.5%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L ₂?

		0.559%
		1.00559%
		0.0694%
		1.00694%

On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:

1R1 = 3.75%, 1R2 = 3.95%, 1R3 = 4.25%, 1R4 = 5.25%

Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years three and four as of March 11, 20XX.

		6.86% and 4.15%
		5.85% and 6.86%
		4.15% and 5.85%
		3.75% and 6.86%