The following information applies to the next 6 questions. Suppose that the stripped U.S. Treasury bonds were...

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Finance

The following information applies to the next 6questions.
Suppose that the stripped U.S. Treasury bonds were priced asfollows in Jan 2015:
Maturity (years)
Price
1
96.1538
2
90.7029
3
83.9619
What is the estimated 1-year spot interest rate for Treasurysecurities?
What is the estimated 2-year spot interest rate for Treasurysecurities?
3%
4%
5%
6%
7%
What is the estimated 3-year spot interest rate for Treasurysecurities?
3%
4%
5%
6%
7%
What is the estimated forward interest rate for the 1-yearperiod starting 1/1/2016?
3%
4%
5%
6%
7%
Suppose there is a 3-year 10% coupon T-bond with annual couponpayment. Based on the above stripped U.S. Treasury bondprices, what should be the price of the 10% coupon bond if there isto be no arbitrage opportunities. Assume the par value is$1,000.
1,036.53
1,041.33
1,052.27
1,065.17
1,110.44
QUESTION 81
What is the yield to maturity of the above 3-year 10%T-bond?
4.87%
5.88%
6.33%
6.57%
7.78%

Answer & Explanation Solved by verified expert

4.1 Ratings (755 Votes)

What is the estimated 1year spot interest rate for Treasury securities 1 year spot rate S1 FV P1 1 100 961538 1 400 What is the estimated 2year spot interest rate for Treasury See Answer

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The following information applies to the next 6questions.Suppose that the stripped U.S. Treasury bonds were priced asfollows in Jan 2015:Maturity (years)Price196.1538290.7029383.9619What is the estimated 1-year spot interest rate for Treasurysecurities?What is the estimated 2-year spot interest rate for Treasurysecurities?3%4%5%6%7%What is the estimated 3-year spot interest rate for Treasurysecurities?3%4%5%6%7%What is the estimated forward interest rate for the 1-yearperiod starting 1/1/2016?3%4%5%6%7%Suppose there is a 3-year 10% coupon T-bond with annual couponpayment. Based on the above stripped U.S. Treasury bondprices, what should be the price of the 10% coupon bond if there isto be no arbitrage opportunities. Assume the par value is$1,000.1,036.531,041.331,052.271,065.171,110.44QUESTION 81What is the yield to maturity of the above 3-year 10%T-bond?4.87%5.88%6.33%6.57%7.78%

Suppose that the stripped U.S. Treasury bonds were priced asfollows in Jan 2015:
	Maturity (years)	Price
	1	96.1538
	2	90.7029
	3	83.9619