Exercise 1

Suppose, we observe the following market data on par bonds, i.e. these bonds trade at par. Assume par value of $1000.

Maturity T	Yield
0.5	0.06%
1.0	0.12%
1.5	0.195%
2.0	0.27%
2.5	0.335%
3.0	0.40

1) Calculate the 6-month zero-coupon yield. Enter zero-coupon yields in decimal form (i.e. enter 0.025 for 2.5%). Round to eight digits after the decimal point (e.g. 0.12345678).

2) Calculate the 1-year zero-coupon yield. Enter zero-coupon yields in decimal form (i.e. enter 0.025 for 2.5%). Round to eight digits after the decimal point (e.g. 0.12345678).

3) Calculate the 1.5-year zero-coupon yield. Enter zero-coupon yields in decimal form (i.e. enter 0.025 for 2.5%). Round to eight digits after the decimal point (e.g. 0.12345678).

4) Calculate the 2-year zero-coupon yield. Enter zero-coupon yields in decimal form (i.e. enter 0.025 for 2.5%). Round to eight digits after the decimal point (e.g. 0.12345678).