Question: Suppose that we observe the yield curve for U . S . Treasury securities and would like to estimate a set of spot rates to

Suppose that we observe the yield curve for U

.

.

Treasury securities and would like to estimate a set of spot rates to use for bond valuation.

We construct the theoretical spot rate curve using the following idea: the value of any coupon bond should be equal to the value of the portfolio of zero

-

coupon bonds that matches its cash flows.

The following table reports maturities, coupon rates, and yields for four Treasury securities

.

Compute the spot rate corresponding to each maturity in the table.

Suppose that we observe the yield curve for U.S. Treasury securities

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