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4. (25 pts) Consider the spot curve for hypothetical annual-coupon U.S. Treasury securities given in the table below (only the first 5 years of the
4. (25 pts) Consider the spot curve for hypothetical annual-coupon U.S. Treasury securities given in the table below (only the first 5 years of the curve are provided). Calculate the missing one-year forward rates f(T*,1) indicated by ???? and add them to the table. Show your work for all calculations in the space below the table.
Year | Spot Rate (%) | Forward Rate (%) |
1.0 | 5.50 | 5.50 |
2.0 | 6.02 | ???? |
3.0 | 6.55 | ???? |
4.0 | 6.87 | ???? |
5.0 | 7.20 | ???? |
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