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9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury

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9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury Note US Treasury Bond US Treasury Bond Coupon 7.25% 10.75% 5.75% 5.00% 8.75% 6.13% Maturity 2 year 3 year 8 year 9 year 18 year 27 year Bid 110:00 123:12 112:00 106:24 143:26 114:11 Ask 110:01 123:13 112:01 106:25 143:27 114:12 Yield (Ask) 2.07% 2.55% 3.97% 4.09% 5.02% 5.13% US Treasury Strip US Treasury Strip US Treasury Strip US Treasury Strip 0.00% 0.00% 0.00% 0.00% 2 year 3 year 8 year 9 year 96:03 92:19 71:13 67:06 96:04 92:21 71:17 67:08 2.00% 2.55% 4.24% 4.47% Express your answers to (a) and (b) as effective annual interest rates. (A) What were the 2-, 3- and 8-year spot interest rates? (B) What is the forward interest rate from 1 year to 2 year (ifi) and from 6 year to 7 year (1f6)? (3 marks) (4 marks) (C) What does the slope of the term structure imply about future interest rates? Explain briefly

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