The spot rates of interest for five U.S. Treasury securities are shown in the following table. Assume

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The spot rates of interest for five U.S. Treasury securities are shown in the following table.

Assume all securities pay interest annually. P-639 Spot Rates of Interest Term to Maturity Spot Rate of Interest 1 year 13.00%

2 12.00 3 11.00 4 10.00 5 9.00

a. Compute the 2-year implied forward rate for a deferred loan beginning in three years.

b. Compute the price of a 5-year annual-pay Treasury security with a coupon rate of 9%

by using the information in the table..

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