The following table shows the prices of a sample of Narnian Treasury strips in December 2018. Each strip makes a single payment of $1,000 at maturity. Maturity Price (%) December 2020 90.703 December...


The following table shows the prices of a sample of Narnian Treasury strips in December 2018. Each strip makes a single payment of $1,000 at maturity.





























MaturityPrice (%)
December 202090.703
December 202185.892
December 202281.491
December 202377.243



a. Calculate the annually compounded, spot interest rate for each year.(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)






b. Is the term structure upward- or downward-sloping or flat?



multiple choice 1





  • Downward-sloping





  • Upward-sloping





  • Flat







c. Would you expect the yield on a coupon bond maturing in December 2023 to be higher or lower than the yield on the 2020 strip?



multiple choice 2





  • Higher





  • Lower







Jun 07, 2022
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