Q18. Chapter 5 You observe the yield curve below for treasury securities (all yields are shown on a bond equivalent basis). All the securities maturing from 1.5 years on are trading at par. The 0.5-year and 1-year securities are zero-coupon instruments. a) (15 marks) Recalculate the 1.5 spot rate in the table above (i.e. prove it is 5.76). Draw the "par yield curve presented in the table. Draw and label all the above points on the diagram. Name the yield curve. Table 6.82 Year 0.5 1.0 1.5 2.0 2.5 Yield to Maturity Spot Rate 5.25% 5.25% 5.50 5.50 5.75 5.76 6.00 6.02 6.25 6.28 Year 3.0 3.5 4.0 4.5 5.0 Yield to Maturity Spot Rate 6.50 6.55 6.75 7.00 7.10 7.25 7.38 7.50 7.67 b) (5 marks) What is Fundamental analysis? List three factors that may affect Fundamental analysis. c) (5 marks) What is Technical analysis? List three factors that may affect Technical analysis