1. ) Consider the following information on zero-coupon bonds with semiannual compounding in yields:

Time to Maturity	Spot rate (%)
6 months	15
12 months	14.5
18 months	13.5
24 months	12
30 months	10
36 months	7.5
42 months	4.5

1. (6 points) Draw a yield curve and justify the shape of the yield curve in compliance with the expectations hypothesis.

2. (6 points) Find the semiannual forward rate for the period from 18 to 24 months.

3. (6 points) Find the one-year forward rate (semiannually compounded) for the period from 18 to 30 months.

4. (6 points) Find the two-year forward rate (semiannually compounded) for the period from 18 to 42 months.
5. (6 points) Find the price of a 3-year semiannual-paying Treasury bond with a coupon rate of 10%.

6. (10 points) Find the expected holding period return on the semiannual coupon-bond with 10% coupon rate over the next three years if you buy the bond today? Assume that the coupon bond matures in 42 months.

2. (20 points) The following are the average yields on U.S. Treasury bonds at two different points in time: