Question: 9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury

9. Using the following data given in the Table below, answer

9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury Note US Treasury Bond US Treasury Bond Coupon 7.25% 10.75% 5.75% 5.00% 8.75% 6.13% Maturity 2 year 3 year 8 year 9 year 18 year 27 year Bid 110:00 123:12 112:00 106:24 143:26 114:11 Ask 110:01 123:13 112:01 106:25 143:27 114:12 Yield (Ask) 2.07% 2.55% 3.97% 4.09% 5.02% 5.13% US Treasury Strip US Treasury Strip US Treasury Strip US Treasury Strip 0.00% 0.00% 0.00% 0.00% 2 year 3 year 8 year 9 year 96:03 92:19 71:13 67:06 96:04 92:21 71:17 67:08 2.00% 2.55% 4.24% 4.47% Express your answers to (a) and (b) as effective annual interest rates. (A) What were the 2-, 3- and 8-year spot interest rates? (B) What is the forward interest rate from 1 year to 2 year (ifi) and from 6 year to 7 year (1f6)? (3 marks) (4 marks) (C) What does the slope of the term structure imply about future interest rates? Explain briefly

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