Calculate the missing spot rates

14. You observe the following Treasury yields (all yields are shown on a bond equivalent basis): 2 Year (Period) Yield to Maturity (%) Spot Rate (%) 2 0.5 (1) 1.0 (2) 1.5 (3) 2.0 (4) 2.5 (5) 3.0 (6) 3.5 (7) 4.0 (8) 4.5 (9) 5.0 (10) 5.5 (11) 6.0 (12) 6.5 (13) 7.0 (14) 7.5 (15) 8.0 (16) 8.5 (17) 9.0 (18) 9.5 (19) 10.0 (20) 10.00 9.75 9.50 9.25 9.00 8.75 8.50 8.25 8.00 7.75 7.50 7.25 7.00 6.75 6.50 6.25 6.00 5.75 5.50 5.25 10.00 9.75 9.48 9.22 8.95 ? ? 8.14 7.86 7.58 7.30 7.02 6.74 6.46 6.18 5.90 5.62 5.35 5.07 4.80 22 23 All the securities maturing from 1.5 years on are selling at par. The 0.5- and 1.0-year securities are zero-coupon instruments. Answer the following questions. a. Calculate the missing spot rates. b. What should the price of a 6% four-year Treasury security be? 24. 14. You observe the following Treasury yields (all yields are shown on a bond equivalent basis): 2 Year (Period) Yield to Maturity (%) Spot Rate (%) 2 0.5 (1) 1.0 (2) 1.5 (3) 2.0 (4) 2.5 (5) 3.0 (6) 3.5 (7) 4.0 (8) 4.5 (9) 5.0 (10) 5.5 (11) 6.0 (12) 6.5 (13) 7.0 (14) 7.5 (15) 8.0 (16) 8.5 (17) 9.0 (18) 9.5 (19) 10.0 (20) 10.00 9.75 9.50 9.25 9.00 8.75 8.50 8.25 8.00 7.75 7.50 7.25 7.00 6.75 6.50 6.25 6.00 5.75 5.50 5.25 10.00 9.75 9.48 9.22 8.95 ? ? 8.14 7.86 7.58 7.30 7.02 6.74 6.46 6.18 5.90 5.62 5.35 5.07 4.80 22 23 All the securities maturing from 1.5 years on are selling at par. The 0.5- and 1.0-year securities are zero-coupon instruments. Answer the following questions. a. Calculate the missing spot rates. b. What should the price of a 6% four-year Treasury security be? 24