Question 5 (15 points)

The current term structure of interest rates are quoted below as yield to maturity (semiannual compounding or Bond Equivalent Yield), which are calculated based on the ontherun Treasury securities, of which the securities with maturity less than or equal to one year are Treasury bills, and those with maturities greater than 1 year are parvalued Treasury notes.

(a)Calculate the missing spot rates (8 points)

(b)A consumer wants to borrow $10,000 loan for 5 years and wants to pay it off by equal amount every six month. What is the amount of semiannual payment (7 points)?

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