You observe the yields of the following Treasury securities Year Yield to Maturity Spot Rate Year Yield to MaturitySpot Rate (Period) (%) (%) (Period) (%) (%) 0.5 (1) 5.25 5.25 5.5 (11) 7.75 7.97 1.0 (2) 5.50 5.50 6.0 (12) 8.00 8.27 1.5 (3) 5.75 5.76 6.5 (13) 8.25 8.59 2.0 (4) 6.00 ? 7.0 (14) 8.50 8.92 2.5 (5) 6.25 ? 7.5 (15) 8.75 9.25 3.0 (6) 6.50 ? 8.0 (16) 9.00 9.61 3.5 (7) 6.75 ? 8.5 (17) 9.25 9.97 4.0 (8) 7.00 ? 9.0 (18) 9.50 10.36 4.5 (9) 7.25 ? 9.5 (19) 9.75 10.77 5.0 (10) 7.50 ? 10.00 (20) 10.00 11.20 All the securities maturing from 1.5 years on are selling at par. The 0.5 and 1.0-year securities are zero-coupon instruments. Answer the below questions. (a) Calculate the missing spot rates. (b) What should the price of a 6% six-year Treasury security be?
You observe the yields of the following Treasury securities Year Yield to Maturity Spot Rate Year Yield to MaturitySpot Rate (Period) (%) (%) (Period) (%) (%) 0.5 (1) 5.25 5.25 5.5 (11) 7.75 7.97 1.0 (2) 5.50 5.50 6.0 (12) 8.00 8.27 1.5 (3) 5.75 5.76 6.5 (13) 8.25 8.59 2.0 (4) 6.00 ? 7.0 (14) 8.50 8.92 2.5 (5) 6.25 ? 7.5 (15) 8.75 9.25 3.0 (6) 6.50 ? 8.0 (16) 9.00 9.61 3.5 (7) 6.75 ? 8.5 (17) 9.25 9.97 4.0 (8) 7.00 ? 9.0 (18) 9.50 10.36 4.5 (9) 7.25 ? 9.5 (19) 9.75 10.77 5.0 (10) 7.50 ? 10.00 (20) 10.00 11.20 All the securities maturing from 1.5 years on are selling at par. The 0.5 and 1.0-year securities are zero-coupon instruments. Answer the below questions. (a) Calculate the missing spot rates. (b) What should the price of a 6% six-year Treasury security be?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You observe the yields of the following Treasury securities
Year Yield to Maturity Spot Rate Year Yield to MaturitySpot Rate
(Period)
(%)
(%)
(Period)
(%)
(%)
0.5 (1)
5.25
5.25
5.5 (11)
7.75
7.97
1.0 (2)
5.50
5.50
6.0 (12)
8.00
8.27
1.5 (3)
5.75
5.76
6.5 (13)
8.25
8.59
2.0 (4)
6.00
?
7.0 (14)
8.50
8.92
2.5 (5)
6.25
?
7.5 (15)
8.75
9.25
3.0 (6)
6.50
?
8.0 (16)
9.00
9.61
3.5 (7)
6.75
?
8.5 (17)
9.25
9.97
4.0 (8)
7.00
?
9.0 (18)
9.50
10.36
4.5 (9)
7.25
?
9.5 (19)
9.75
10.77
5.0 (10)
7.50
?
10.00 (20)
10.00
11.20
All the securities maturing from 1.5 years on are selling at par. The 0.5 and 1.0-year
securities are zero-coupon instruments. Answer the below questions.
(a) Calculate the missing spot rates.
(b) What should the price of a 6% six-year Treasury security be?
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