1. You observe the yields of the following Treasury securities at below (all yields are shown on a bond-equivalent basis). All the securities maturing from 1.5 years on are selling at par. The 0.5 and 1.0-year securities are zero-coupon instruments. Year (Period) 0.5 (1) 1.0 (2) 1.5 (3) 2.0 (4) 2.5 (5) 3.0 (6) 3.5 (7) 4.0 (8) 4.5 (9) 5.0 (10) Yield to Maturity Spot Rate (%) 5.25 5.25 5.55 5.55 5.85 5.86 6.15 6.17 6.45 ? 6.75 6.81 7.05 7.14 7.35 7.47 7.65 7.82 7.95 8.17 Year (Period) 5.5 (11) 6.0 (12) 6.5 (13) 7.0 (14) 7.5 (15) 8.0 (16) 8.5 (17) 9.0 (18) 9.5 (19) 10.00 (20) Yield to Maturity Spot Rate (%) % 8.25 8.53 8.55 8.91 8.85 9.29 9.15 9.70 9.45 10.12 9.75 10.56 10.05 11.03 10.35 11.53 10.65 12.06 10.95 12.63 (a) Calculate the missing spot rates. (10 Points) (b) What should the price of a 5% 3-year Treasury security be? (10 Points) (c) What is the six-month forward rate starting in the fifth year? (5 Points)