3. STRUCTING A SPOT RATE CURVE FROM BOND PRICES Here we are going to use actual Treasury notes and actual prices, so all coupons, yields and spot rates should be on a semiannual basis. Pretend that the settle date is Oct 31, 2020 (de- spite being a Saturday), so we can ignore all accrued interest and fractional periods. Consider the follow four bonds and their prices: 1.375% T-note maturing 30-Apr-21 with price 100.61 1.50% T-note maturing 31-Oct-21 with price 101.38 0.125% T-note maturing 30-Apr-22 with price 99.96 2.200% T-note maturing 31-Oct-22 with price 103.69 All four of these bonds pay coupons on Oct 31, 2020 (which actually gets paid on Monday Nov 2) so just ignore this coupon and just assume accrued interest is zero (so clean and dirty prices are the same). (a) Find the spot rate curve (on a semiannually compounded basis) for the four dates (i.e. 0.5, 1, 1.5, 2 years). (b) Calculate the forward rates fo.5,1, f1,1.5, f1.5,2 (s.a. basis). 3. STRUCTING A SPOT RATE CURVE FROM BOND PRICES Here we are going to use actual Treasury notes and actual prices, so all coupons, yields and spot rates should be on a semiannual basis. Pretend that the settle date is Oct 31, 2020 (de- spite being a Saturday), so we can ignore all accrued interest and fractional periods. Consider the follow four bonds and their prices: 1.375% T-note maturing 30-Apr-21 with price 100.61 1.50% T-note maturing 31-Oct-21 with price 101.38 0.125% T-note maturing 30-Apr-22 with price 99.96 2.200% T-note maturing 31-Oct-22 with price 103.69 All four of these bonds pay coupons on Oct 31, 2020 (which actually gets paid on Monday Nov 2) so just ignore this coupon and just assume accrued interest is zero (so clean and dirty prices are the same). (a) Find the spot rate curve (on a semiannually compounded basis) for the four dates (i.e. 0.5, 1, 1.5, 2 years). (b) Calculate the forward rates fo.5,1, f1,1.5, f1.5,2 (s.a. basis)