I have a few HOMEWORK questions I need help on! No one in my family can help me and there is no Finance tutor at my school. Please help me



1. Given the information below, answer the question that follows.



R* = 3.0% real risk free interest rate

R1 = 5.0% rate on a one year loan

R2 = 5.5% rate on a two year loan



What are the expected inflation rates for one year and two? Also, estimate the rate expected on a one-year loan in year 2? How do you explain the fact that the two-year rate is higher than the one-year rate?



2. IRA Investments develops a retirement program for you on your 30th birthday. You plan to retire on your 60th birthday and want tot establish a plan that will require equal annual end-of-year installments into a retirement account. The first deposit is made one year from now and the final payment on your 60th birthday. The retirement plan will allow you to withdraw $100,000 per year for 15 years with the first withdrawal on your 61st birthday. The rate of interest is 8% throughout.



3. Suppose you purchase a bond at Par value priced to yield 10%. The bond has a principle value of $1000, pays annual coupon payments and a maturity of 5 years. What is the capital gain or loss if you sell the bond after 3 years when interest rates rose to 12%? Compute the current yield and the capital gains yield using the price after 3 years