Determine the theoretical value of a 10% 10-year Treasury Security as shown in Exhibit 5-7 by using the Theoretical Spot Rates as shown in Exhibit 5-6

Exhibit 5-7 Determining the Theoretical Value of a 10% 10-Year Treasury Security Using the Theoretical Spot Rates Spot Rate PV of $1 at PV of Cash Flow 4.872107 4.735942 4.591756 4.440782 4.283619 4.12103 3.953783 3.81628 3.653589 3.509758 3.378483 3.250138 3.112238 2.989446 2.869594 2.738125 2.608831 2.513325 2.388643 47.593170 Period YearCash Flow 5.25 5.50 5.76 6.02 6.28 6.55 6.82 6.87 7.09 7.20 7.26 7.31 7.43 748 7.54 7.67 7.80 7.79 7.93 8.07 Spot Rate 0.974421 0.947188 0.918351 0.888156 0.856724 0.824206 0.790757 0.763256 0.730718 0.701952 0.675697 0.650028 0.622448 0.597889 0.573919 0.547625 0.521766 0.502665 0.477729 0.453268 1.5 2.0 2.5 3.0 3.5 4.0 5.0 5.5 6.0 10 12 14 7.0 7.5 8.0 16 17 18 9.0 20 0.0 105 Theoretical value = 1 15.4206