Assume the following par yields for the on-the-run Treasury yield curve.

Date Period Years Par Yield = coupon rate

2/15/2014 1 0.5 2.10% (BEY of 6-month T-bill)

8/15/2014 2 1.0 2.30% (BEY of 1-year T-bill)

2/15/2015 3 1.5 2.50%

8/15/2015 4 2.0 2.70%

2/15/2016 5 2.5 3.00%

8/15/2016 6 3.0 3.40%

1. Calculate the spot rate curve from the par yield curve using bootstrapping. Show all calculations and include six decimal places.

2. Calculate the 1-year (2-period) forward rate 1 year (2 periods) from today and the 1-year (2-period) forward rate two years (4 periods) from today. Use the spot rate curve you calculated in problem 1. above. Show all calculations and include six decimal places.

3. Calculate the accrued interest for a 4% coupon Treasury that pays interest (actual/actual) on 2/15 and 8/15 of each year, matures on 8/15/2025 and settles on 9/29/2015. Show all calculations and include six decimal places.

4. Calculate the accrued interest for a 4% coupon FNMA bond that pays interest (30/360) on 5/31 and 11/30 of each year, matures on 5/31/2025 and settles on 9/29/2015. Show all calculations and include six decimal places.