You observe the following prices for Treasury securities (per $100 of par value): Maturity Coupon Rate Price 6 months 0 $99.01 1 year 3.5% $100.99 1.5 years 3.0% $100.30 The 18-month theoretical spot rate implied by these price is

You observe the following prices for Treasury securities (per $100 of par value): Maturity Coupon Rate Price 6 months 0 $99.01 1 year 3.5% $100.99 1.5 years 3.0% $100.30 The 18-month theoretical spot rate implied by these price is

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Question

You observe the following prices for Treasury securities (per $100 of par value):
Maturity     Coupon Rate                Price
6 months               0                         $99.01
1 year 3.5%                $100.99
1.5 years 3.0%                $100.30
The 18-month theoretical spot rate implied by these price is

A: 2.3%

B: 2.5%

C: 2.8%

D: 3.1%

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