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The prices of a selection of Treasury Strips are shown in the table below. Treasury strips do not pay any coupons: each strip only pays
The prices of a selection of Treasury Strips are shown in the table below. Treasury strips do not pay any coupons: each strip only pays the face value of the bond (1,000 USD) on the maturity date. Years to Maturity 1 2 3 4 Price, (% of face value) 98.852% 95.351 91.544 87.480 a. Calculate 1-year interest rate (Intermediate computations should not be rounded. Enter your answer in percentages with two decimal places.) b. Calculate 2-year interest rate (Intermediate computations should not be rounded. Enter your answer in percentages with two decimal places.) c. Calculate 3-year interest rate (Intermediate computations should not be rounded. Enter your answer in percentages with two decimal places.) d. Calculate 4-year interest rate (Intermediate computations should not be rounded. Enter your answer in percentages with two decimal places.) e. What is the shape of the Yield Curve? f. Is this the typical yield curve shape? a. 1 year Interest rate b. 2 year Interest rate c. 3 year Interest rate d. 4 year Interest rate 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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