Question: 4. You observe the following Treasury yields (all yields are shown on a bond equivalent basis): Spot Rate (%) 8.00 7.75 7.49 7.23 Year (Period)

4. You observe the following Treasury yields (all yields are shown

4. You observe the following Treasury yields (all yields are shown on a bond equivalent basis): Spot Rate (%) 8.00 7.75 7.49 7.23 Year (Period) Yield to Maturity (%) 0.5 (1) 8.00 1.0 (2) 7.75 1.5 (3) 7.50 2.0 (4) 7.25 2.5 (5) 7.00 3.0 (6) 6.75 3.5 (7) 6.50 4.0 (8) 6.25 4.5 (9) 6.00 5.0 (10) 5.75 6.96 ? ? 6.17 5.90 5.63 All the securities maturing from 1.5 years on are selling at par. The 0.5 and 1.0-year securities are zero-coupon instruments. Answer the following questions. a) Calculate the missing spot rates. b) What should the price of a 6% four-year Treasury security be

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