Question 2 (30 points): Constructing the Yield Curve from T-Bill quotes.\ \ Note: this question can be answered based on Episodes alone.\ \ \ \ In this problem, I ask that you compute the bid price, ask price, and the continuously compounded yield implied by the mid-price, of a T-Bill.\ \ Below is a snapshot of T-Bill prices taken from Factset at the time of writing.\ \ Today's date is 01/26/2024.\ \ \ \ \ Factset Snapshot:\ \ \ \ \ \ \ \ \ \ Maturity\ \ Discount\ \ Yield\ \ Mid Yld\ \ Bid Yld Chg\ \ Bid Yld %Chg\ \ 27 Feb '24\ \ 5.2425 / 5.2325\ \ 5.3556 / 5.3453\ \ 5.3505%\ \ -0.1242\ \ -231.4271%\ \ 23 May '24\ \ 5.1650 / 5.1550\ \ 5.3423 / 5.3318\ \ 5.3371%\ \ -0.1886\ \ -352.2863%\ \ 26 Dec '24\ \ 4.6075 / 4.5975\ \ 4.8404 / 4.8304\ \ 4.8354%\ \ -0.2279\ \ -471.3157%\ \ Part A (10 points):\ \ For each T-Bill Maturity above (February, May December) compute the quoted bid price (in dollars) and quoted ask price (in dollars).\ \ Then report the mid-price for each T-Bill, i.e., the average of your computed bid price and ask price for each bond.\ \ Hints:\ \ 1. I suggest first computing the "years to maturity". \ \ 2. I suggest computing the bid and ask prices first since Mid-price is the average of them.\ \ Maturity T-Bill Mid-Price\ 27 Feb '24 \ 23 May '24 \ 26 Dec '24 \ Points possible: 10\ Question 2\ Part B (5 points):\ \ Based on the mid-prices obtained in part A, compute and report the implied yields (continuously compounded) for the three T-Bill maturities above. \ \ Hint: these are the spot rates that you could get from investment between today (01/26/24) and the corresponding maturity.\ \ Note: Your responses should be reported in percent (%).\ \ Maturity \ T-Bill Yield\ \ 27 Feb '24 %\ 23 May '24 %\ 26 Dec '24 %\ Points possible: 5\ Question 3\ Part C (5 points): \ \ Based on your answer to Part B, is the yield curve upward or downward sloping?\ \ Hint: focus just on the three maturities provided above, and dont worry about what happens for other maturities, as I have not offered this data.\ Responses\ \ Downward Sloping\ Downward Sloping\ \ Upward Sloping\ Upward Sloping\ Points possible: 5