busi 640 question2

2. Currently interest rates on US Treasury Bills and Bonds are at historical lows. With short- term interest rates near zero, a signicant portion of outstanding government debt has been issued with less than a. 2-year maturity. The yield curve of pure discount bond government debt is currently as follows: Maturi 6-month 1 ear 2 ears 3 ears 4 ears 5 ears Annual Yield 0.19% 0.25% 0.53% 0.86% 1.32% Question a a. The US Treasury just issued a pure discount bond with ve years to maturity. It has a $10,000 face value and the price in the market was $9,124.20. What is the yield to maturity on the bond? (10) b. If the US Treasury issued a 5-year treasury bond with a $10,000 face value and a 1.5% coupon rate, what do you estimate would be the price of this coupon bond in the market? (15) c. The Congressional Budget Ofce forecasts that the national debt outstanding will total $24.5 trillion at the end of 2023. Given the interest rate forecasts above, if all of that debt had a 1-year maturity, issued at the end of 2023, what is your forecast of interest expense for this debt during 2024? (15)