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The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Calculate the interest rate offered by each of these strips.

Years to Maturity Price, %

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.) Interest rate %

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

c. Is the yield curve upward-sloping, downward-sloping, or flat? Upward-sloping Downward-sloping Flat

d. Is this the usual shape of the yield curve? Yes No

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91594510

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