6. One-year T-bill rates are expected to steadily increase by 150 basis points per year over the...
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6. One-year T-bill rates are expected to steadily increase by 150 basis points per year over the next six years. Determine the required interest rate on a three-year T-bond and a six-year T-bond if the current one-year interest rate is 7.5%. Assume that the pure expectations hypothesis for interest rates holds.
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Financial Markets and Institutions
ISBN: 978-0321280299
5th edition
Authors: Frederic S. Mishkin, Stanley G. Eakins
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