Excel's Solver utility can also find an optimum solution involving more than one variable. We will use Solver to find the best fit of a straight line yield curve for some bond prices (more information on Solver is available in the previous assignment, or in the online tutorial). You are to calibrate a straight line yield curve where y(t) ?=? y₀+mt by finding appropriate values fory₀andm. The valuey(t) is the semiannually compounding bond yield, or IRR, for a bond of maturityt. The yield curve is to be the best straight-line fit for the following four bonds: Bond 1 has face value $100 and a term of 1 year with semiannual coupons of 10% and a price of $105.92. Bond 2 has face value $100 and a term of 1.5 year with semiannual coupons of 4% and a price of $98.51. Bond 3 has face value $100 and a term of 2 year with a semiannual coupon of 6% and a price of $101.16. Bond 4 has face value $100 and a term of 5 year with a semiannual coupon of 7% and a price of $101.72. Create a spreadsheet with headings similar to the following:

A B C D E F G H I yo m =(G7-H7)^2 1.5 $100 =y_0 +m *83 2 $100 ? 10 $100 11 12 Objective 13 =sum (17:110) 14 15