1.Plot the Spot rate curve against the rates for Treasury curve. The curve only needs to include maturities up to 10 years. You can assume that the maturities of the quoted Treasuries align perfectly with the maturities of the quoted spot rates (so, for example, the 10-year treasury matures on 2/1/2027).

a.Include the [clearly labeled] plot in the Word document.
b.Discuss the two curves. Specifically:
i.What is driving the current shape of the curves?
ii.How are the spot rates different from the yields, and why?

2.Using the spot rate curve, find the price and yield to maturity of the above bond issued by PG. You may assume that the bond is of similar risk to Treasury securities.

a.Include a [clearly labeled] table in the Word document that contains the price, YTM, and, from the following question, Macaulay and Modified Durations, and the price impact of the change in rates.
b.Discuss the bond’s price and yield. Specifically,
i.If it is trading at a premium or discount, explain why.
ii.Explain the conditions under which an investor would realize the yield to maturity for this particular bond.

3. Find the Macauley and Modified Durations of the bond, using the present values derived inquestion 2.

a.Interpret the durations, clearly explaining what information an investor should take from each.
b.Use the duration to estimate the impact to the bond’s price of a 75 bp decrease in interest rates. Explain in the text the accuracy of this number.
c.Plot the price impacts of changes in yield ranging from -200 bp to +200 bp (you can do this at intervals of 10bp). Include the plot in the Word document. Discuss the plot. Specifically,
i.What is the shape of the plot?
ii.Is this an accurate representation of price impact? Why or why not?

Spot Rates
9.2.2017
1.8.2017 0,66
1.2.2018 0,93
1.8.2018 1,07
1.2.2019 1,19
1.8.2019 1,36
1.2.2020 1,48
1.8.2020 1,61
1.2.2021 1,76
1.8.2021 1,85
1.2.2022 1,93
1.8.2022 2,04
1.2.2023 2,11
1.8.2023 2,16
1.2.2024 2,22
1.8.2024 2,3
1.2.2025 2,36
1.8.2025 2,42
1.2.2026 2,47
1.8.2026 2,52
1.2.2027 2,55
1.8.2027 2,59
1.2.2028 2,6
1.8.2028 2,63
1.2.2029 2,62
1.8.2029 2,67
1.2.2030 2,69

1.Plot the Spot rate curve against the rates for Treasury curve. T...