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The following table represents the term structure of spot interest rates: Rate (% p.a., semi- annual compounding) 3.30% Term (years) 0.50 1.00 1.50 2.00 2.50
The following table represents the term structure of spot interest rates: Rate (% p.a., semi- annual compounding) 3.30% Term (years) 0.50 1.00 1.50 2.00 2.50 3.00 3.92% 4.35% 4.52% Consider two bonds Bond A and Bond B. Bond A has a maturity of 1.5 years and pays coupons semi-annually at the rate of 10% per year. Its yield to maturity is 3.9050% p.a., semi- annual compounding. Bond B has a maturity of 3 years and pays coupons semi-annually at the rate of 7% per year. Its yield to maturity is 4.4805% p.a., semi-annual compounding. What are the spot interest rates for the terms of 1 year and 2 years?
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