Question
In: Finance
The following table shows the prices of a sample of U.S. Treasure STRIPs in August 2020....
The following table shows the prices of a sample of U.S. Treasure STRIPs in August 2020. Each strip makes a single payment of $1,000 at maturity without any coupons. (10 points)
|
Maturity |
Price (%) |
|
August 2021 |
95.53 |
|
August 2022 |
91.07 |
|
August 2023 |
86.20 |
|
August 2024 |
81.08 |
Calculate the annually compounded, spot interest rate for each year.
Spot rate for 1-year strip =
Spot rate for 2-year strip =
Spot rate for 3-year strip =
Spot rate for 4-year strip =
- Is the term structure upward or downward sloping or plat? Explain.
- Calculate the annually compounded, one-year forward rate of interest for August 2022.
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 year agoRelated Solutions
The following table shows the prices of a sample of Treasury strips. Each strip makes a...
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
97.752
%
2
94.251
3
90.444
4
86.380
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d. What is the 4-year interest rate?
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The
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December 2020 97.418
December 2021 94.259
December 2022 90.851
December 2023 86.976
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