Refer back to question 6A.l. Years to Maturity Yield to Maturity(%) 1...................................................................1.26 2...................................................................2.00 3..................................................................2.47 4..................................................................2.79 5..................................................................3.02 a.

Question:

Refer back to question 6A.l.
Years to Yield to If the expectations theory of the term structure is correct, what do the forward rates calculated in (a) tell you about expected future short-term interest rates?
b. If the liquidity-preference theory is added, what can you conclude about expected future short-term rates?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...