Question
5. You have the following price data on Treasury Zero Coupon Bonds Treasury Zeros Security Dollar Price 6-Mth T-Bill 98.8646 12-Mth T-Bill 97.3805 2-Yr T-Note
5. You have the following price data on Treasury Zero Coupon Bonds
Treasury Zeros | |
Security | Dollar Price |
6-Mth T-Bill | 98.8646 |
12-Mth T-Bill | 97.3805 |
2-Yr T-Note | 93.4955 |
3.5-Yr T-Note | 86.3278 |
5-Yr T-Note | 76.9866 |
7-Yr T-Note | 61.7076 |
12-Yr T-Bond | 33.9872 |
a) Compute the interpolated Spot rate curve at 6-month intervals. You must compute the rates for 0.5 Years, 1 year, 1.5 Years, 2 years and so on up to 12 years (24 rates)
Use the cubic spline Interpolation Excel add-in from http://www.srs1software.com/SRS1CubicSplineForExcel.aspx
It is free you need not pay if you download just the interpolation add-in.
b) Use the interpolated spot curve to price a 2.5 Year corporate bond with a semiannual coupon of 10%. The Z-Spread for this bond is 87 BP.
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