1. the yield-to-maturity on a quoted on a semi-annual bond basis on 6-month, 1-year, and 18-month T-bills are 2.8%, 3.2%, and 4.02%, respectively. A 1.5-year, 4% Treasury note is selling at par. If a 1.5-year semi-annual pay corporate bond with a 7% coupon is selling for 102.395, what is the spread over the Treasury note for this bond? Is the zero-volatility spread 127, 130 or 133?

2. Assume the current 6-month rate is 3.5% and the 6-month forward rates are those in the following table (all on a semi-annual bond basis)

periods from now forward rates

1 3.8%

2 4.0%

3 4.4%

4 4.8%

calculate the corresponding spot rates

what is the value of a 1.5 year, 4% semi-annual pay bond based on spot rates