Question: Exercise 1.1 Term Structure Construction For the Treasury curve with the data given below. | Tenor Coupon Freq Mkt Price 1 100 2 100 3

Exercise 1.1 Term Structure Construction For the Treasury curve with the data given below. | Tenor Coupon Freq Mkt Price 1 100 2 100 3 100 5 100 7 100 10 100 20 100 30 100 a) Estimate the discount factor assuming forward rates are piecewise constant. b) Estimate the discount factor assuming forward rates are linear continuous (Ending forward rate for interval equals the starting forward rate for next interval.). c) Plot the forward rates and discount factors for both methods. d) What are the durations of a 1, 5, 10, and 30-year semi- annual pay bonds under both discount factors

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