Problem 4:

The prices (per $1000 in face value) of zero-coupon bonds in the U.S. that prevailed on 8/31/09 (at the height of the great recession following the financial crisis in 2008) are shown below. Calculate YTM without excel.

Price

Maturity Date (per $1000 in face value) YTM

08/31/10 $996.81

08/31/11 $982.24

08/31/12 $958.01

08/31/13 $927.48

08/31/14 $890.76

08/31/15 $852.27

08/31/16 $813.09

08/31/17 $783.30

08/31/18 $751.84

08/31/19 $716.50

08/31/20 $684.95

Question:

What was the zero yield curve for US Treasuries on 8/31/09? (Keep you answers, as we will use your answers on the next problem set.)