Finance

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6. The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity.

  

Years to Maturity


Price, (% of face   value)

 

1


97.652


%

 

2


94.151


 

3


90.344


 

4


86.280


       

a. What is the 1-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What is the 2-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the 3-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What is the 4-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

e. Is the yield curve upward-sloping, downward-sloping, or flat?

f. Is this the usual shape of the yield curve?

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