6, (10 points) Consider investment in three STRIPS (M=100), the first STRIPS matures in six months, the second STRIPS matures in 12 months, the third STRIPS matures in 18 months. The price of the first STRIPS is 98:12 (so y = 1.6518%), the price of the second STRIPS is 96:20 (so y2 = 1.7315%), and the price of the third STRIPS is 94:26 (73 = 1.7915%). Based on the spot rates above, calculate the implied forward rates fi and f2. Assume the unbiased Expectations Theory holds, so Ey) = fil and E(y) = f*. Also, assume that realized future spot rates match the expectations: yi = fi and y = fi. Calculate the one period realized rates of return on the three STRIPS (i.e., buy the bond today and sell it six months later). 6, (10 points) Consider investment in three STRIPS (M=100), the first STRIPS matures in six months, the second STRIPS matures in 12 months, the third STRIPS matures in 18 months. The price of the first STRIPS is 98:12 (so y = 1.6518%), the price of the second STRIPS is 96:20 (so y2 = 1.7315%), and the price of the third STRIPS is 94:26 (73 = 1.7915%). Based on the spot rates above, calculate the implied forward rates fi and f2. Assume the unbiased Expectations Theory holds, so Ey) = fil and E(y) = f*. Also, assume that realized future spot rates match the expectations: yi = fi and y = fi. Calculate the one period realized rates of return on the three STRIPS (i.e., buy the bond today and sell it six months later)