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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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