Yield Curve For Zero Coupon Bonds rated AA

Maturity YTM Maturity YTM Maturity YTM

$1$ year $8\mathrm{.}00\%7$ year $9\mathrm{.}15\%13$ year $10\mathrm{.}45\%$

$2$ year $8\mathrm{.}11\%8$ year $9\mathrm{.}25\%14$ year $10\mathrm{.}65\%$

$3$ year $8\mathrm{.}20\%9$ year $9\mathrm{.}35\%15$ year $10\mathrm{.}75\%$

$4$ year $8\mathrm{.}50\%10$ year $9\mathrm{.}47\%16$ year $10\mathrm{.}95\%$

$5$ year $8\mathrm{.}75\%11$ year $9\mathrm{.}52\%17$ year $11\mathrm{.}00\%$

$6$ year $8\mathrm{.}85\%12$ year $9\mathrm{.}77\%18$ year $11\mathrm{.}25\%$

$5.$ To the nearest basis point what is the expected interest rate on a one year bond purchased three years from today?

a$.9\mathrm{.}40\%$

b$.8\mathrm{.}35\%$

c$.9\mathrm{.}12\%$

d$.8\mathrm{.}78\%$

e$.0\mathrm{.}30\%$

$6.$ You just bought a $15$ year maturity Xerox corporate bond rated AA with a $0\%$ coupon. You expect to hold the bond for $5$ years and then sell it$.$ Assuming that the forward rate is an accurate, unbiased estimate of the expected future spot rate find the expected sale price of the bond in $5$ years to the nearest dollar $($watch out for rounding error$).$

a$.$ $$394$

b$.$ $$449$

c$.$ $$383$

d$.$ $$329$

e$.$ $$428$

$7.$ To the nearest basis point what is your best estimate of what $0$R$1$ will be next year?

a$.8\mathrm{.}34\%$

b$.8\mathrm{.}11\%$

c$.8\mathrm{.}05\%$

d$.8\mathrm{.}00\%$

e$.8\mathrm{.}22\%$