Assignment
Suppose you want to provide a quote for a Treasury bond that matures in 2 years and pays semi-annual coupons of 3%. The next coupon payment are in 6,12,16 and 24 months. Assume that prices of US treasury bills and US treasury bonds are given by:
| Maturity(years) |
Coupon($ semiannual) |
Cash Price |
| 0.25 |
na |
$99.46 |
| 0.5 |
na |
$98.82 |
| 1.00 |
2.250 |
$99.65 |
| 1.50 |
2.250 |
$99.26 |
| 2.00 |
2.500 |
$99.11 |
a) deduce the spot curve (zero rates) assume spot rates are semi annually compounded
b) compute the price of the required Treasury bond
c) provide the quote with the required convention fixed maturity
added information to previous question after clarification was sought from professor i believe i can find the rates using 100=99.46 * eR*0.25 is this the right way to go about solving for rates?
And than find the PV of coupon payments of the 3% bond discounted by the rates found above?