The following table shows the prices of a sample of Treasury strips. Each strip makes a single
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The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Calculate the interest rate offered by each of these strips.
Years to MaturityPrice, %
1............................96.852%
2...............................93.351
3...............................89.544
4...............................85.480
a. What is the 1 -year interest rate?
b. What is the 4-year rate?
c. Is the yield curve upward-sloping, downward-sloping, or flat?
d. Is this the usual shape of the yield curve?
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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