PLZ PLZ HELP

The semi-annually compounded swap rates are as shown in Figure 1 below:

1. Calculate the term structure of interest rates.

2. An AA-rated firm issues a 3.6% p.a. six-year semi-annual pay bond. Calculate the bonds

   1. Price,

   2. Yield,

   3. Duration, and

   4. Convexity.

3. If interest rates exhibit volatility of 12% p.a. across the yield curve, calculate the arbitrage-free interest rate grid using the Black-Derman-Toy (BDT) methodology.

Period 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 Swap Rate 1.800% 2.098% 2.346% 2.543% 2.719% 2.884% 3.038% 3.182% 3.315% 3.437% 3.458% 3.551% Period 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 Swap Rate 1.800% 2.098% 2.346% 2.543% 2.719% 2.884% 3.038% 3.182% 3.315% 3.437% 3.458% 3.551%