3.) A Treasury bill with 85 days remaining until maturity is quoted as having a yield of 4.4% on a discount basis. What is the price of this Treasury bill, per $1 par value?

Consider the following yield curve for the following off-the-run Treasury bonds (that pay semiannual coupons):

Maturity YTM Coupon Price (% of par)

6 months	3%	3%	100
1 year	4%	4%	100
18 months	5%	5%	100

a.) What is the 1-year spot rate?

b.) What is the 18-month spot rate?

Use the following information to answer questions c-d.

Suppose you are trying to assign a value to two illiquid, fixed-rate, semiannual-pay corporate bonds, both with par values of $100:

Bond X, with a 5% coupon rate and a maturity of 6 years

Bond Y, with a 6% coupon rate and a maturity of 7 years

You decide to use matrix pricing to estimate the prices of the two bonds. Consequently, you gather the following information on four bonds of similar credit risk:

Bond 1, with a 6% coupon rate and a maturity of 5 years, trading for 102% of par value Bond 2, with a 8% coupon rate and a maturity of 5 years, trading for 111% of par value Bond 3, with a 5% coupon rate and a maturity of 8 years, trading at 93% of par value Bond 4, with a 7% coupon rate and a maturity of 8 years, trading at 105% of par value

c.) What is the estimated value of Bond X using matrix pricing?

d.) What is the estimated value of Bond Y using matrix pricing?

Use the following information to answer question e.

A floating rate note (FRN) with exactly three years remaining until maturity offers a coupon rate equal to 3-month Libor + 0.40% (the quoted margin) on a quarterly basis. Currently, 3-month Libor is 1.60%. The FRN is currently priced in the market at a price of 98 (% of par value).

e.) What discount margin is reflected in the FRNs price?