The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity.

Years to Maturity

Price, (% of face value)

1

97.552

%

2

94.051

3

90.244

4

86.180

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 2-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the 3-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What is the 4-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

e. Is the yield curve upward-sloping, downward-sloping, or flat?

Upward-sloping

Downward-sloping

Flat

f. Is this the usual shape of the yield curve?

Yes

No

rev: 03_05_2018_QC_CS-120510