Suppose that a firm wishes to issue a one-year, 3.00% coupon bond that pays semiannually with a face value of $1,000 today. Based on the yield curve you derived from the STRIPS bonds above, ascertain whether this bond would sell at a premium, a discount, or at par. Assume for the sake of simplicity, that this firm faces no default risk such that it can borrow at Treasury rates given in the yield curve

Maturity:                                    annualized spot rate

1 year                                           5%

2 years                                         5.5%

3 years                                          6%

4 years                                            6%

5 years                                              ?

Assuming the expectations theory of the term structure is correct, calculate the expected one-year interest rate one year from now (i.e. 1f2)