35. Prices and spot interest rates (S3.3) What spot interest rates are implied by the following Treasury bonds? Assume for simplicity that the bonds pay annual coupons. The price of a one-year strip is 97.56%, and the price of a four-year strip is 87.48%.

Maturity (years) Coupon Price (%)

5 2 92.89 5 3 97.43 3 5 105.42 Chapter 3 Valuing Bonds 83