Answer: 5.0564%

The six-month zero rate is first found from the six-month bill price: \[ r_{0.5} = 2\ln\left(\frac{100}{98}\right) = 4.0405\% \] Then bootstrap the one-year rate using the one-year bill price. The bill pays $1 at 6 months and $101 at 1 year (coupon plus principal): \[ 97 = 1\cdot e^{-0.040405\cdot 0.5} + 101\cdot e^{-R\cdot 1.0} \] Solving for \(R\): \[ R = -\ln\left(\frac{97 - e^{-0.040405\cdot 0.5}}{101}\right) = 5.0564\% \] So the correct answer is **5.0564%**.

Author: Manit Arora