Question: 2. Bootstrap: You are given these prices for three Treasuries with semi-annual payments: Bond A B C Maturity (Years) 0.5 1.0 1.5 Coupon Rate

2. Bootstrap: You are given these prices for three Treasuries with semi-annual

2. Bootstrap: You are given these prices for three Treasuries with semi-annual payments: Bond A B C Maturity (Years) 0.5 1.0 1.5 Coupon Rate (%) 8.00 4.00 6.00 Price 97.561 90.703 80.496 a) Construct combinations, or portfolios, of these securities that replicate (mimic) zero coupon bonds with maturities 0.5, 1.0, and 1.5 years. (10 points) b) Use the synthetic zeros (coupon securities held in a portfolio that mimic zeros) to compute their prices. (10 points) c) Use the prices of zeros to compute spot rates and forward rates. (10 points)

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