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The annual yield to maturity for the 6-month and 1-year Treasury bill is 3.6% and 4.2%, respectively. These yields represent the 6-month and 1-year spot

The annual yield to maturity for the 6-month and 1-year Treasury bill is 3.6% and 4.2%, respectively. These yields represent the 6-month and 1-year spot rates. Also assume the following Treasury yield curve (i.e., the price for each issue is $100) has been estimated for 6-month periods out to a maturity of 3 years.

Years to Maturity / Annual Yield to Maturity

Years to maturity Annual yield to maturity
1.5 4.4%
2 4.8%
2.5 5.4%
3 6.%

(i) Compute the 1.5-year, 2-year, 2.5-year, 3-year, 3.5-year, and 4-year spot rates.

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