Question
1. The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Years to Maturity Price,
1. The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity.
Years to Maturity | Price, (% of face value) | |
1 | 97.552 | % |
2 | 94.051 | |
3 | 90.244 | |
4 | 86.180 | |
a. What is the 1-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
b. What is the 2-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. What is the 3-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
d. What is the 4-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
e. Is the yield curve upward-sloping, downward-sloping, or flat?
f. Is this the usual shape of the yield curve?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started