Question
a) Determine the value of a 4.8% 10-Year Treasury Note using the spot rates in the Table. The spot rates are expressed in annual basis
a) Determine the value of a 4.8% 10-Year Treasury Note using the spot rates in the Table. The spot rates are expressed in annual basis
| Period | years | cash-flows | spot rate (%)* | Present value |
| 1 | 0.5 | 3.0000 | ||
| 2 | 1 | 3.3000 | ||
| 3 | 1.5 | 3.5053 | ||
| 4 | 2 | 3.9164 | ||
| 5 | 2.5 | 4.4376 | ||
| 6 | 3 | 4.7520 | ||
| 7 | 3.5 | 4.9622 | ||
| 8 | 4 | 5.0650 | ||
| 9 | 4.5 | 5.1701 | ||
| 10 | 5 | 5.2772 | ||
| 11 | 5.5 | 5.3864 | ||
| 12 | 6 | 5.4976 | ||
| 13 | 6.5 | 5.6108 | ||
| 14 | 7 | 5.6643 | ||
| 15 | 7.5 | 5.7193 | ||
| 16 | 8 | 5.7755 | ||
| 17 | 8.5 | 5.8331 | ||
| 18 | 9 | 5.9584 | ||
| 19 | 9.5 | 6.0863 | ||
| 20 | 10 | 6.2169 | ||
| Total |
b) Draw the graph of spot rates and yield to maturity (y axis) over the life of the Treasury note (x axis) and comment briefly. c) Explain why the value of the Treasury note should be based on discounting each cash flow using the corresponding Treasury spot rates.
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Handbook On Second Lien Loans & Intercreditor Agreements
Authors: Mark N. Berman, Jo Ann J. Brighton
1st Edition
0981865593, 978-0981865591
