Question
1. One-year Treasury securities yield 4.4%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6%. If the pure expectations theory
1. One-year Treasury securities yield 4.4%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.
2. Interest rates on 4-year Treasury securities are currently 6.1%, while 6-year Treasury securities yield 7.7%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.
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ISE Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders Professor, Marcia Millon Cornett, Otgo Erhemjamts
10th International Edition
1260571475, 9781260571479
