Suppose today is 8/15/2020. The following STRIP data is for the end of the trading day on 8/15/2020:

Maturity Date Bid Ask Ask Yield

8/15/2021 99.896 99.96 0.05

8/15/2022 99.722 99.812 0.104

8/15/2023 99.338 99.477 0.187

8/15/2024 98.752 98.977 0.271

8/15/2025 97.791 98.026 0.416

8/15/2026 96.58 96.913 0.542

8/15/2027 95.269 95.593 0.665

8/15/2028 93.857 94.219 0.766

8/15/2029 92.289 92.674 0.868

8/15/2030 90.608 91.051 0.961

8/15/2031 88.79 89.273 1.056

8/15/2032 87.14 87.658 1.122

8/15/2033 85.339 85.895 1.195

8/15/2034 83.73 84.312 1.244

8/15/2035 81.946 82.569 1.302

8/15/2036 80.175 80.813 1.357

8/15/2037 78.588 79.253 1.393

8/15/2038 76.951 77.641 1.432

8/15/2039 75.382 76.096 1.463

8/15/2040 73.575 74.309 1.511

8/15/2041 71.922 72.616 1.55

8/15/2042 70.182 71.091 1.577

8/15/2043 68.406 69.192 1.628

8/15/2044 66.778 67.571 1.661

8/15/2045 65.149 65.955 1.692

8/15/2046 63.682 64.501 1.714

8/15/2047 62.412 63.246 1.724

8/15/2048 61.29 62.149 1.725

8/15/2049 60.22 61.086 1.726

a. What is the 10-year spot rate?

b. What is the 5-year spot rate?

c.. What is the yield-to-maturity of a 6-year zero coupon bond?

d. What is the discount price of a 20-year bond?

e. Your relative promises to pay you $5,000, 12 years from now. What is the maximum amount you would lend to your relative today? Why?

f. What is the present value of risk-free $1 to be received 15-years from now?

g. The bond maturing on 8/15/2040 has an ask price of 74.309. Given this price show that the reported ask yield 1.511 is correct,

Answer rating: 100% (QA)

Solution a The 10year spot rate is the yield on a 10year bond that matures on 8152030 The bid price ... View the full answer