Question
3. (25 pts) Consider the par yield curve for the U.S. Treasury securities given in the table below (only the first 3 years of the
3. (25 pts) Consider the par yield curve for the U.S. Treasury securities given in the table below (only the first 3 years of the curve are provided). Calculate the missing spot rates indicated by ???? using bootstrapping and add them to the table. (The example of bootstrapping given in the Chapter 10 slides will be very helpful in completing this table.) Show your work for all calculations in the space below the table
Year | Yield to Maturity (%) | Spot Rate (%) |
0.5 | 5.25 | 5.25 |
1.0 | 5.50 | 5.50 |
1.5 | 5.75 | ???? |
2.0 | 6.00 | ???? |
2.5 | 6.25 | ???? |
3.0 | 6.50 | ???? |
. All prices and interest rates must be expressed to three decimal places. SHOW YOUR WORK FOR EVERY PROBLEM IN ORDER TO RECEIVE ANY CREDIT.
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