3. Use this list of Treasury bond prices as of February 15, 2001 to answer the...

Transcribed Image Text:

3. Use this list of Treasury bond prices as of February 15, 2001 to answer the following questions. Coupo n Maturi ty Quote 8s Os 6s 8/15/01 8/15/02 8/15/02 101 91.5 100 10s 2/15/02 ? (a) Derive the 6-month, 1-year and 1.5-year discount factors using the 8s, Os and 6s. (b) What is the arbitrage-free price for the 10s given the discount factors from (a). (c) Compute the 6-month, 1-year and 1.5-year par yields. 3. Use this list of Treasury bond prices as of February 15, 2001 to answer the following questions. Coupo n Maturi ty Quote 8s Os 6s 8/15/01 8/15/02 8/15/02 101 91.5 100 10s 2/15/02 ? (a) Derive the 6-month, 1-year and 1.5-year discount factors using the 8s, Os and 6s. (b) What is the arbitrage-free price for the 10s given the discount factors from (a). (c) Compute the 6-month, 1-year and 1.5-year par yields.

Answer rating: 100% (QA)

To answer the questions we need to calculate the discount factors and par yields based on the given Treasury bond prices Lets go step by step a Derivi... View the full answer