What is the ytm of these two treasuries

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Reference no: EM131234466

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Let me lead you along in working out how you can "STRIP" a Treasury coupon bond. Assume the 12-month Treasury note costs $10,065.22 and pays a coupon of $150 in 6 months, and interest plus coupon of $10,150 in 12 months. (Its payment patterns indicate that it was originally issued as a "3% semiannual, level-coupon note.") Now assume the 6-month Treasury bill costs $10,103.96 and has only one remaining coupon-plus-principal payment of $10,200. (It was originally issued [and perhaps many years ago] as a "4% semiannual, level-coupon bill.")

(a) What is the YTM of these two Treasuries?

(b) Graph a yield curve based on the maturity of these two Treasuries.

(d) Graph a yield curve based on zero notes.

(e) Do the yield differences between the 1-year zero note and the 1-year coupon note seem large to you?

Reference no: EM131234466

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