All rates should be calculated to $3$ decimal places in $\%,$ the discount factors to $5$ decimal places $($e$.$g$.0\mathrm{.}98765)$ and the bond prices to $3$ decimal places The following are the prices for US Treasury on$-$the$-$run bonds for the closing of $1$st March $2024($the bond prices are the clean prices and they have been converted to decimals from the published $1/32$ format$)$: Term $-$Maturity$-$ Issue Date $-$Coupon Price

$2$ y:$28/02/202628/02/20244\mathrm{.}625\%100\mathrm{.}191$

$3$y :$15/02/202715/02/20244\mathrm{.}125\%99\mathrm{.}469$

$5$y :$28/02/202928/02/20244\mathrm{.}250\%100\mathrm{.}441$

$7$y :$28/02/203128/02/20244\mathrm{.}250\%100\mathrm{.}381$

$10$y :$15/02/203415/02/20244\mathrm{.}000\%98\mathrm{.}575$ You are also given the following information: $-$ The face value of the bonds is $100.-$ All bonds are semi$-$annual coupon bonds. $-$ Ignore weekends for the coupon payment dates $($e$.$g$.$ for the $2-$year bond, they are $28$th February and $28$th August each year$).-$ Accrued interest $=$ coupon rate $\backslash$times face value $\backslash$times N$1/365,$ where N$1$ is the number of days between the issue date and the quote date $(1$st March $2024),$ exclusive of the day of issue date. $($E$.$g$.$ for the $2-$year bond, N$1=2$ days$).$ For year $3$ N$1=15,$ for year $5$ N$1=2,$ for year $7$ N$1=2$ and for year $10$ N$1=15-$ Both the zero$-$coupon rates and the yield$-$to$-$maturity $($YTM$)$ should be computed as semi$-$annually compounding rates. $-$ For coupon bonds, the YTM is the rate Y that solves, where DP is the dirty price, C is the coupon rate, T is the maturity in full numbers $($e$.$g$.$ T $=10$ for the $10-$year bond$),$ N$2$ is number of days between the quote date and the first coupon date, and N$3$ is number of days in the first coupon period $($e$.$g$.$ for the $2-$year bond, N$2=180$ days and N$3=182$ days$).$

The zero$-$coupon rates z$($t$)$ given above for t $(0\mathrm{.}5,1)$ are annualised rates,$i,e.$

$D(t)=\frac{1}{(1+\frac{z(t)}{2}{)}^{2}t}$

where D$($t$)$ is the t$-$year discount factor.

$($a$)$ Compute the yield$-$to$-$maturity of all the on$-$the$-$runompute the yield$-$to$-$maturity of all the on$-$the$-$run bonds. You may use the Excel spreadsheet function $$Data $->$ What$-$if$-$Analysis $->$ Goal Seek$$ to find the YTMs$.$

$($b$)$ Assuming that your answer to $($a$)$ are the semi$-$annually compounding par yields for the respective maturity T $12,3,5,7,10),$ calculate the $6-$monthly discount factors D$($t$)$ and the semi$-$annual zero$-$coupon rates z$($t$),$ where t $10\mathrm{.}5,1,1\mathrm{.}5,...,9\mathrm{.}5,10\}.$ Any required par yields for other maturities should be computed using a linear interpolation method.

$($c$)$ Hence calculate the price of a $5-$year semi$-$annual coupon bond with an annual coupon rate of $1\mathrm{.}875\%$ and face value $100.$ Assume that the bond's maturity is $1$st March $2029$ and that it has just made its most recent coupon payment. What is its YTM$?$ On the same date a bond with maturity $28$th February $2029$ with coupon rate $1\mathrm{.}875\%$ was quoted at $4\mathrm{.}179\%.$ Why do you think that the YTMs are different on the two $5-$year bonds?