1. Consider the information for the following zeros and coupon Treasury bonds:

Bond Maturity Par Value Coupon* Price Spot Rate

P 1.0 $100 0 $98

Q 2.0 $1000 $80 $960

R 3.0 $100 0 $93

S 4.0 $100 $8 $90.75

*Annual coupon paid annually

1. Calculate the spot rates for the four bonds.
2. Calculate the value of the Treasury with the following cash-flows: Year 1: $80, Year 2: $100, Year 3: $120, Year 4, $140.