An analyst has obtained the following Treasury data for bonds currently trading at their par values: Maturity Coupon Price 6 months 2.5% 100 1 year 3.5% 100 18 months 4.5% 100 Using the method of bootstrapping, which of the following is closest to the theoretical Treasury spot rate curve? 6-month spot rate 1-year spot rate 18-month spot rate A) 1.25% 3.2501% 4.5305% B) 2.50% 3.2501% 4.1333% C) 2.50% 3.5088% 4.5305% D) 2.50% 3.5088% 4.1333% The answer is C. I guess it is an easy one on the basis of the choices. But just want to know how to solve it on the BA II Calculator?
I dont think there are special keys for calculation like this. Just use the formula and plug in the values 100 = (1.75/1.0125)+ (101.75/X^2) solve for x and multiply by 2. I hope that answers your question
Thanks. I knew that. I thought that there was an easy way.
I can use some help with this question if somebody has time…
florin, 6 month spot rate - 2.5 1 yr - 1.75 semiannual coupon and then final payment of 101.75 100=1.75/1.0125+101.75/x^2 solve for x = 1.017543968899239 now to obtain the 1 yr rate = (x-1)*2*100 = 3.508793779847874% 1.5yr.- 2.25 semiannual coupon 100 = 2.25/1.0125+2.25/1.01754^2+102.25/X^3 solve for x = 1.022652435224719 now again (x-1)*2*100 = 4.530487044943810% hope this helps
Here it is looking at the 1 year treasury PV = PV of first coupon payment + PV of the Face Value and Last Coupon 100 = (1.75/1.0125)+ (101.75/X^2) Looking at 18 months treasury, similarly 100 = (2.25/1.0125) +(2.25/1.0175^2) + (102.25/x^3) solve for X and multiply by 2. Im really lazy at typing but if you want me to elaborate something more, please let me know.
ok i got it thanks guys