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The table below provides information about treasury bonds. Bond Number Bond Principal ($) Time to Maturity (months) Annual Coupon (%) Market Price ($) 1 100

The table below provides information about treasury bonds.

Bond Number Bond Principal ($) Time to Maturity (months) Annual Coupon (%) Market Price ($)
1 100 6 3 98
2 100 12 5 97
3 100 18 0 85

  1. Calculate zero rates (based on continuous compounding) for 6, 12, and 18 months and graph the treasury yield curve and provide your answers in the following table:
  2. Estimate the price of an 18-month Treasury bond that pays a coupon of 6%.
Bond 1 Zero Rate
1 0.070183
2 0.08035
3 0.108346

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