4. Problem 6.18 (Vield Curves) 0 Book Suppose the nation rate is expected to be 7.05 next year 4.454 the following year and thereafter Assume that the real riske free rate will remain at 2.45% and that matty risk premum on Treasury sets is from zero on very short term bonds (those that mature in a few days) to 0.2% for at securities. Furthermore, maturity risk pres increase 0.2 for wach year to maturity up to limit of 5 year or longer term T-bonde Calculate the interest rate on year restur securities, thound your answer to two decimal places Calculate the interest rate on 2-year Treasury securities found your answer to two decimales Call the interest rate on your resury securities Round your answer to two decimal places Calculate the rest rate and attressury securities Hound your answer to two decimal place Calculate the interest rate any reasury second your answer to two deomap Calculate the interest raton 10 year Treasury curities. Round your answer to two decal places Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places. % Select the correct yield curve based on these data A 10f Interest Rate (%) 9 8+ 2 6 5 4 3 2 1 2 2.4 6 8 10 12 14 16 18 Years to Maturity B 205 Interest Rate (%) 9 7 6 5 4 3 2 1 8 10 12 14 16 18 101 Interest Rate (%) 9+ 8+ 77 6 5 4 3+ 21 1 -2 2 4 6 8 10 12 14 16 18 Years to Maturity D 101 Interest Rate (%) 9 8+ 7+ 6+ 5+ 4 3+ 2 1 -2 2 4 6 8 10 12 14 16 18 Years to Maturity The correct sketch is Select- Suppone a Arrated company which is the highest bond rating firm can have) had bonds with the same maturities as the Treasury bonds. Estimate what you believe a AAA rated baby's yield curve would look like on the same graph with the Treasury bond yield curve. (Hints Think about the default risk premonts long term versus its short term bench The vidid curve for the rate corporate bonds will be the yield curve for the Treary securities What will be there love of a mulher forted company with a much her of dubulting and bod! The yeddi curve of a mother low rated company will be bus the videre for the countries and the eldre for the Acte corpo