Question 1

Consider the data on four US Treasury coupon bonds obtained from the Wall Street Journal on December 1, 2020. The coupons are paid semi-annually.

Maturity	Ask Price (per $100 of Face Value)	Coupon (in %)
5/31/2021	100.3120	2.000
11/30/2021	101.1260	1.500
5/15/2022	102.1240	1.750
11/30/2022	99.3140	0.125

1. Construct the time line (table), showing cash flows of these bonds distributed according to the dates when they will be paid;
2. Construct the term structure of interest rates (you have enough information to find four rates);
3. Your company plans to issue two-year maturity bonds with 5% coupon, paid semi-annually. What should be the price of your bonds if they have the same level of risk as those listed above?
4. What is the yield to maturity on your bond in part (c)?