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Suppose that you observe the following yields of Treasury securities that are shown based on bond-equivalent basis (annualized rates with semi-annual payments): Year to Maturity

Suppose that you observe the following yields of Treasury securities that are shown based on bond-equivalent basis (annualized rates with semi-annual payments):

Year to Maturity Yield to Maturity (%) Spot Rates (%)
0.5 6
1.0 6
1.5 5
2.0 4
2.5 3
3 4

Using bootstrapping, calculate the 1.5 year theoretical annualized spot rate in percentage terms. Please round your answer to 3 decimal places.

Similarly, calculate the 2 year theoretical annualized spot rate in percentage terms. Please round your answer to 3 decimal places.

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