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Problem Set 2 -- SOLUTIONS On 4/15/2019, you put together the list of most liquid Treasury notes and bonds and collect their fair market prices. The data are the file "Problem Set 2.xlsx." You want to calculate the spot rate, or zero-coupon yield, curve by bootstrapping in order to identify opportunities for a relative value trade. Note again that the day count convention is Actual Actual and the yields should be presented as bond equivalent" or annualized semiannual yields. 1. Calculate the spot rate curve. What is the fair yield of a hypothetical 30-year zero coupon Treasury bond? Note that such zero-coupon bond actually exists, through the process of stripping the coupon bond into coupons and principal redemption, each of which is a tradable zero coupon bond. (8 points) 4.4631% Problem Set 2 -- SOLUTIONS On 4/15/2019, you put together the list of most liquid Treasury notes and bonds and collect their fair market prices. The data are the file "Problem Set 2.xlsx." You want to calculate the spot rate, or zero-coupon yield, curve by bootstrapping in order to identify opportunities for a relative value trade. Note again that the day count convention is Actual Actual and the yields should be presented as bond equivalent" or annualized semiannual yields. 1. Calculate the spot rate curve. What is the fair yield of a hypothetical 30-year zero coupon Treasury bond? Note that such zero-coupon bond actually exists, through the process of stripping the coupon bond into coupons and principal redemption, each of which is a tradable zero coupon bond. (8 points) 4.4631%