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You observe the following prices for Treasury securities (per $100 of par value): Maturity     Coupon Rate                Price 6 months               0                         $99.01 1 year 3.5%                $100.99 1.5 years 3.0%                $100.30 The 18-month theoretical spot rate implied by these price is

You observe the following prices for Treasury securities (per $100 of par value): Maturity     Coupon Rate                Price 6 months               0                         $99.01 1 year 3.5%                $100.99 1.5 years 3.0%                $100.30 The 18-month theoretical spot rate implied by these price is

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You observe the following prices for Treasury securities (per $100 of par value):
Maturity     Coupon Rate                Price
6 months               0                         $99.01
1 year 3.5%                $100.99
1.5 years 3.0%                $100.30
The 18-month theoretical spot rate implied by these price is

A: 2.3%

B: 2.5%

C: 2.8%

D: 3.1%

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