Originally Posted by

**bondhelp** 1. Shown below are selected annualized spot interest rates, rt, for U.S. Treasury Strips for Monday, January

28, 2008.

Maturity t

(in years) rt

1 2.08%

2 2.17%

3 2.48%

4 2.72%

5 2.86%

(a) Calculate the price of a Strip for each maturity, per $100 of par value.

My Solution

Year 1

100/(1.0208)

Year 2

100/(1.0217)^2

(b) Calculate the forward rates, ft, for t=2, 3, 4, and 5.

My Solution

Year 2

(1.0217^2/1.0208) -1

(c) Using the spot rates, calculate the price (per $100 par) of a Treasury note that matures in 5 years and has a coupon rate of 5.5% (assuming annual coupon payments).

My solution

?? help

(d) Calculate the yield to maturity on the bond in (c) above.

My solution

I plan to use the yield function in excel

(e) Calculate the modified duration (MD) of the bond in (c) above.

My solution

I plan to use excel's mduration function