From the Treasury strip yield curve, the current required yields on one-year and two-year Treasuries are i₁ = 5.75 percent and i₂ = 7.25 percent, respectively. Further, the current yield curve indicates that appropriate one-year discount (corporate) bonds are yielding k₁ = 6.95 percent, and two-year discount (corporate) bonds are yielding k₂ = 14.45 percent. Calculate the one-year forward rate on the Treasuries. Leave five decimal places for the output and then express it in percentages.

b) (15 points) From the Treasury strip yield curve, the current required yields on one- Treasuries are i₁ = 5.05 percent. Further, the current yield curve indicates that appropriate one-year discount (corporate) bonds are yielding k₁ = 6.15 percent. Suppose that one-year forward rate on the Treasuries (f1) is 9.088%, and one-year forward rate on the corporate bond (c1) is 16.574%. Based on this information, calculate the marginal probability of repayment on the corporate bond in years 1 and 2, respectively. Leave four decimal places for each output and then express each output in percentages.

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