Given the observed yields below, what is the six month spot rate, six months from now for a bond maturing in 1 year 6 month par yield 1 0 1 year par yield 1 5 (both are annualized) Solve using the standard bond value formula PV C 1 (1 y 1 ) 1 C 2 (1 y 2 ) 2 C n (1 y n ) n Hint Assume a current price of 100 and the coupon rate is equal to the 1 year yield Use 6 decimals of precision as you work through the problem Enter your answer in percent format with 4 decimals

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Question: Given the observed yields below, what is the six-month spot rate, six months from now for a bond maturing in 1 year? 6-month par yield

Given the observed yields below, what is the six-month spot rate, six months from now for a bond maturing in 1 year?

6-month par yield = 1.0% 1-year par yield = 1.5% (both are annualized)

Solve using the standard bond value formula: PV = C₁/(1+y₁)¹ + C₂/(1+y₂)² + + C_n/(1+y_n)ⁿ

Hint: Assume a current price of 100 and the coupon rate is equal to the 1-year yield. Use 6 decimals of precision as you work through the problem. Enter your answer in percent format with 4 decimals.

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