Question
The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Calculate the interest rate offered
The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Calculate the interest rate offered by each of these strips. Years to Maturity Price, % 1 96.952% 2 93.451 3 89.644 4 85.580 a. What is the 1-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the 4-year rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Is the yield curve upward-sloping, downward-sloping, or flat? Upward-sloping Downward-sloping Flat d. Is this the usual shape of the yield curve? Yes No
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