Calculate the average spread because the 6-year bond is the midpoint of five and seven years. Average spread = (1.16 + 1.40) / 2 = 1.28%. 3. Add the average spread to the YTM of the 6-year Treasury (benchmark) bond. 1.74 + 1.28 = 3.02%, which is our estimate of the YTM on the newly issued 6-year, A rated bond.

1. If spot rates are 3.2% for one year, 3.4% for two years, and 3.5% for three years, the price of a $100,000 face value, 3-year, annual-pay bond with a coupon rate of 4% is closest to: A. $101,420. B. $101,790. C. $108,230. 2. An investor paid a full price of $1,059.04 each for 100 bonds. The . purchase was between coupon dates, and accrued interest was $23.54 per bond. What is each bond's flat price? A. $1,000.00. B. $1,035.50. C. $1,082.58. 3. Cathy Moran, CFA, is estimating a value for an infrequently traded bond with six years to maturity, an annual coupon of 7%, and a single-B credit rating. Moran obtains yields-to-maturity for more liquid bonds with the same credit rating: 5% coupon, eight years to maturity, yielding 7.20%. # 6.5% coupon, five years to maturity, yielding 6.40%. The infrequently traded bond is most likely trading at: A. par value. B. a discount to par value. C. a premium to par value.