Question: Please Solve by Hand Consider the prices for various US Treasury bonds (as shown below). Time to Maturity Coupon Rate Bond Price in Years 6

Please Solve by Hand

Consider the prices for various US Treasury bonds (as shown below).

Time to Maturity Coupon Rate Bond Price
in Years
6 months 0 $985
1 year 0 $965
18 months 0 $948
2 years 0 $929

As you probably know, using the above information you can build the yield curve through time 2.

However, you'd like to extend the yield curve to time t = 2.50. You've decided to attempt to do so, not with a zero-coupon bond, but rather with a coupon bond.

A 2.50 year 6% coupon bond is currently trading at $1,057. It pays semi-annual coupons and has a face value of $1000. The next coupon is due in 6 months.

Using the 2.5 year coupon-bond, can you estimate the YTM on the yield curve for t = 2.5?

If you can, then do so and provide an answer in EAR units (as a PERCENT, not as a decimal).

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