4. (Spot rate projecte) It is November 5 in the year 2012. The bond quotations of Table 4.6 are available. Assume that all bonds make semiannual coupon payments on the 15th of the month. Estimate the continuous-time) term structure in the form of a 4th-order polynomial. (1) = 49+017 +azra+ar+a4r4. where is time in units of years from today. The discount rate for cash flows at timer is accordingly d(t) = -1 Recall that accrued interest must be added to the price quoted to get the total price. Estimate the coefficients of the polynomial by minimizing the sum of squared enors between the total price and the price predicted by the estimated term structure curve. Plot the curve and give the five polynomial coefficients. TABLE 4.6 BOND QUOTES Coupon Maturity 6,625 15-Feb-22 9.125 15-Feb-22 7.875 15-Aug-22 8.250 15-Aug-22 8.250 15-Feb-23 8.375 15-Feb-23 8.000 15-Aug-23 8.750 15-Aug-23 6.875 14-Feb-24 8.875 14-Feb-24 6.875 15-Aug-24 8.625 15-Aug-24 7.750 15-Feb-25 11.250 15-Feb-25 8.500 15-Aug-25 10.500 15-Aug-25 7.875 15-Feb-26 8.875 15-Feb-26 Ask price 100,00 100.67 100.69 100.03 100.22 100.38 100.81 102.03 98.16 102.28 97 41 101.72 99.16 109.13 10141 107 84 99.41 103.00 4. (Spot rate projecte) It is November 5 in the year 2012. The bond quotations of Table 4.6 are available. Assume that all bonds make semiannual coupon payments on the 15th of the month. Estimate the continuous-time) term structure in the form of a 4th-order polynomial. (1) = 49+017 +azra+ar+a4r4. where is time in units of years from today. The discount rate for cash flows at timer is accordingly d(t) = -1 Recall that accrued interest must be added to the price quoted to get the total price. Estimate the coefficients of the polynomial by minimizing the sum of squared enors between the total price and the price predicted by the estimated term structure curve. Plot the curve and give the five polynomial coefficients. TABLE 4.6 BOND QUOTES Coupon Maturity 6,625 15-Feb-22 9.125 15-Feb-22 7.875 15-Aug-22 8.250 15-Aug-22 8.250 15-Feb-23 8.375 15-Feb-23 8.000 15-Aug-23 8.750 15-Aug-23 6.875 14-Feb-24 8.875 14-Feb-24 6.875 15-Aug-24 8.625 15-Aug-24 7.750 15-Feb-25 11.250 15-Feb-25 8.500 15-Aug-25 10.500 15-Aug-25 7.875 15-Feb-26 8.875 15-Feb-26 Ask price 100,00 100.67 100.69 100.03 100.22 100.38 100.81 102.03 98.16 102.28 97 41 101.72 99.16 109.13 10141 107 84 99.41 103.00