2. [10.0] Consider the following bond market information for a set of Treasury government bonds: Bond Coupon rate Maturity (years) 2 3 4 5 6 7 8 9 10 11 1.50%

1.75% 2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% Coupon frequency Annual Annual Annual Annual Annual Annual Annual Annual Annual Annual Annual 2 3 4 5 6 7 8 9 10 8 Dirty-Price (% of par value) 93.71 91.56 90.24 89.74 90.04 91.09 92.82 95.19 98.14 98.10 1/2 a) Estimate the spot yield curve using the Bootstrap method considering bonds 1 to 10. b) Estimate the 5.25-year spot interest rate using the following interpolation method: (i) linear; (ii) cubic. Comment. c) Estimate the fair value of Bond 11 using the yield curve estimated in (a). Formulate a trading recommendation (buy/sell/hold) for this bond. d) Estimate the yield to maturity of Bond 11. Word & EXCEL & PDF & RScript/Python files used in the project. e) Assume the investor buys Bond 5 and holds it until maturity. Estimate the effective rate of return on investment assuming the yield curve does not change over the 5-year period. f) Compute the Fisher-Weil duration and convexity for all bonds and estimate the impact of a 50 basis points positive parallel shift in then yield curve on the bond's market prices.