You have been provided with the following information zero coupon bonds with $1000 face value.
|
Maturity - semi -annual periods
|
semi-annual spot rates
|
|
1
|
4.25
|
|
2
|
4.15
|
|
3
|
3.95
|
|
4
|
3.70
|
|
5
|
3.50
|
|
6
|
3.25
|
|
7
|
3.05
|
|
8
|
2.90
|
1. Compute the forward interest rates.
2. Graph the yield curve.
3. Explain the factors that account for the shape of the curve.