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Table 1 contains a term structure of continuously compounded interest rates for US treasury debt, on October 3 1 , 2 0 2 2 .
Table contains a term structure of continuously compounded interest rates for US treasury
debt, on October Table contains treasury bond prices listed in the WSJ on October
You will use both tables to i price a bond you are interested in and ii assess the
current state of the economy. The following questions will guide you through these objectives.
Table : Treasury bond prices in the WSJ on October
Table : Term structure of
continuously compounded
rates, on October
Remember that US treasury bonds:
Pay coupons semiannually
Use the actualactual convention for accrued
interest calculations
Use Table to determine the missing value in Table the continuously compounded
rate for cash flows arriving on July remember "today", is October
a Clearly indicate what bond in Table you are using for your calculations A B
or
b For the chosen bond, use the midprice, and determine the dirty midprice
c From the dirty price and information in Table determine the discount factor,
where October and July
d From the discount factor, extract the continuously compounded rate,
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