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A fixed income analyst at XYZ Wealth Management Company finds that that yield to maturity (BEY basis) on the 6 month and 1 year T
A fixed income analyst at XYZ Wealth Management Company finds that that yield to maturity (BEY basis) on the 6 month and 1 year T bills is 4.6% and 5.0%. Note these yield essentially are the 6 month and 1 year spot rates. Further the yield to maturity (BEY basis) for the 1.5 yr, 2 yr, 2.5 yr, and 3 yr T-bonds are as given below. The analysts job is to arrive at todays spot rate curve, i.e. to compute the 1.5 yr, 2 yr, 2.5 yr, and 3 yr spot rates. Assume that the 1.5 yr, 2 yr, 2.5 yr, and 3 yr T-bonds are trading at par value.
Years to Maturity | Yield to Maturity |
1.5 | 5.40% |
2 | 5.80% |
2.5 | 6.40% |
3 | 7.00% |
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