S 2

For the Treasury curve with the data given below. calculated in Exercise 10 Tenor Price Coupon Cpn Freq You have a 1 100 0.21% 2 IN 100 0.23% N Receive 3 100 0.28% N o Fixed an 5 100 0.48% 2 7 100 0.71% 2 10 100 0.97% 2 20 100 1.36% 2 What 30 100 1.45% 2 W a) Estimate the forward rates assuming they are piecewise constant. Wha b) Estimate the forward rates assuming they are piecewise What | linear. Ending forward rate for interval equals the starting forward rate for next interval. tarting in Functional form of the forward rates are given below Years 0-1 1-2 2-3 3-5 5-7 7-10 10-20 20-30 Constant Beg/End FWD1 FWD2 FWD3 FWD4 FWD5 FWD6 FWD7 FWD8 Years 0-1 1-2 2-3 3-5 5-7 7-10 10-20 20-30 FWD1 FWD2 FWD3 FWD4 FWD5 FWD6 FWD7 Linear Begin FWD1 FWD2 FWD3 FWD4 FWD5 FWD6 FWD7 FWD8 Linear End FWD1 Can use excel with the solver function for this exercise