Treasury Spot Rates equivalent, question, selling, payment, figure

glamorous

The yield to maturity on a bond equivalent basis on 6-month and I-year T-bills
are 2.8% and 3.2%, respectively. A 1.5-year, 4% Treasury note is selling at par.

What is the 1.5-month Treasury spot rate?

Ok, in solving this question why do you not use the 1.5-year, 4% Treasury note as the 1.5 month treasury spot rate? This note is used to figure out the coupon payment. Why?

koba

par15 thanks.

so the Note represents the 1.5-year YTM which is different from the the spot rate that we are trying to calculate right?

rkapoor

gazhoo, what is the answer for 1.5Y Treasury Spot Rate? I want to verify it with mine before posting it.

Daniel1985

gazhoo Wrote:
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> What is the 1.5-month Treasury spot rate?
>

1.5 MONTH? 'Month' doesn't make sense here. Can u check the question again?

LokiDog2

Because YTM assume that each cash flow is discounted at the yield. In this scenario YTM is 4% since bond is trading at par

i.e.
=20/1.02+20/1.02^2+1020/1.02^3

But spot rates are different. For 6 month you have 2.8% and for 1 year you have 3.2%. So the spot rate for 1.5 year will be different.