Question
The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Years to Maturity Price, (%
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 | 98.052 | % |
2 | 94.551 | |
3 | 90.744 | |
4 | 86.680 |
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?
f. Is this the usual shape of the yield curve?
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