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Suppose you observe the following information related to yields on 4 different Treasury securities; each security pays a semi-annual coupon. If there is no arbitrage,

  1. Suppose you observe the following information related to yields on 4 different Treasury securities; each security pays a semi-annual coupon. If there is no arbitrage, what is the price of a 2-year, 8%-coupon Treasury security? Hint: you gotta bootstrap!

Maturity (years)

Coupon

(%)

Yield-to-Maturity

(%)

0.5

2.00

1.20

1

2.50

1.80

1.5

2.50

2.60

2

3.00

3.60

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