Question
The following table shows the prices of a sample of U.S. Treasure STRIPs in August 2020. Each strip makes a single payment of $1,000 at
The following table shows the prices of a sample of U.S. Treasure STRIPs in August 2020. Each strip makes a single payment of $1,000 at maturity without any coupons. (10 points)
| Maturity | Price (%) |
| August 2021 | 95.53 |
| August 2022 | 91.07 |
| August 2023 | 86.20 |
| August 2024 | 81.08 |
Calculate the annually compounded, spot interest rate for each year.
Spot rate for 1-year strip =
Spot rate for 2-year strip =
Spot rate for 3-year strip =
Spot rate for 4-year strip =
- Is the term structure upward or downward sloping or plat? Explain.
- Calculate the annually compounded, one-year forward rate of interest for August 2022.
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
7th Edition
0073530751, 9780073530758
