1. Using Excel Chart menu, construct the graph of the term structure: time on the horizontal axis, a corresponding annualized term structure rate on the vertical axis.

Present annualized rates

Bond 1 (6 Months) 0.2501

Bond 2 (12 Months) 0.058

Bond 3 (18 Months) 0.0673

Bond 4 (24 Months) 0.0825

Bond 5 (30 Months) 0.0900

Bond 6 (36 Months) 0.0804

Show how you converted prices from ticks into dollars and cents

Bond 1: 97-29 3/8 -> 97+ (29/32) = 97.90625 -> $97.91

Bond 2: 97-22 3/8 -> 97+ (22/32) = 97.6875 -> $97.69

Bond 3: 97-12 5/8 -> 97+ (12/32) = 97.375 -> $97.38

Bond 4: 99-03-> 99+ (03/32) = 99.09375 -> $99.09

Bond 5: 100-10 -> 100+ (10/32) = 100.3125 -> $100.31

Bond 6: 99-04 -> 99+ (04/32) = 99.125 -> $99.13

b. Show how you calculated semi-annual coupon payments

Formula: coupon payment = face value * (annual coupon rate/ number of payments per year)

Bond 1: $1.25

Bond 2: $25

Bond 3: $30

Bond 4: $41.25

Bond 5: $45

Bond 6: $40