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8. Yields on three Treasury notes are given as follows: Yield to Maturity Maturity Coupon Bond A 1 year 0% 5.25% Bond B 2 year
8. Yields on three Treasury notes are given as follows: Yield to Maturity Maturity Coupon Bond A 1 year 0% 5.25% Bond B 2 year 5% 5.50% Bond C 3 year 6% 6.00% Coupons are paid annually (A) What are the prices of the 1-year, 2-year, and 3-year notes? (3 marks) (B) What is the spot interest rates for years 1, 2 and 3? (6 marks) (C) What is the implied forward rate for year 2 to year 3 1f2? (1 mark)
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