Question: Question 2 (20 points) Suppose the 1- and 2-year Treasury notes and 3-year STRIPS prices are as given below. All bonds have a face value

Question 2 (20 points) Suppose the 1- and 2-year Treasury notes

Question 2 (20 points) Suppose the 1- and 2-year Treasury notes and 3-year STRIPS prices are as given below. All bonds have a face value of $100. The coupons are paid in annual installments. Price Coupon Rate 6% Maturity 1 year 2 years 3 years Type T-note T-note STRIPS 4% $105.50 $106.95 $ 98.04 a) (12 points) Compute the spot rates (zero rates). b) (8 points) Compute the price of a 3-year Treasury with coupon rate of 3.0% and $100 face value

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