Question 1A. (Please report calculations up to the 3rd decimal point) a) The table below reports the characteristics of some on-the-run US Treasury securities. Assume the no arbitrage condition to hold. Calculate the price of a 2-Year 2.75% T-Note. All coupon payments are semi-annual and par value is $100. Show all steps in your calculations. [hint: bootstrap the discount factor instead of the spot rate for the 2-year maturity.] Coupon (%) Price Yield (%) Maturity 6-Month Bill 0 99.963 1-Year Bill 0 99.818 2-Year Note 0.375 99.480 (15 marks) b) Without further calculations, why is the 0.375% 2-Year Note trading at a discount whereas the 2.75% 2-Year Note trading at a premium? (5 marks) 0.075 0.182 0.637 Question 1A. (Please report calculations up to the 3rd decimal point) a) The table below reports the characteristics of some on-the-run US Treasury securities. Assume the no arbitrage condition to hold. Calculate the price of a 2-Year 2.75% T-Note. All coupon payments are semi-annual and par value is $100. Show all steps in your calculations. [hint: bootstrap the discount factor instead of the spot rate for the 2-year maturity.] Coupon (%) Price Yield (%) Maturity 6-Month Bill 0 99.963 1-Year Bill 0 99.818 2-Year Note 0.375 99.480 (15 marks) b) Without further calculations, why is the 0.375% 2-Year Note trading at a discount whereas the 2.75% 2-Year Note trading at a premium? (5 marks) 0.075 0.182 0.637