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Business Finance Question 5-16. Suppose today is January 2, 2019, and investors expect the annual risk-free interest rates in 2023 and 2024 to be: Year

Business Finance Question

5-16.

Suppose today is January 2, 2019, and investors expect the annual risk-free interest rates in 2023 and 2024 to be:

Year One-Year Rate

2023 4.5%

2024 2.3

Currently, a four-year Treasury bond that matures on December 31, 2022, has an interest rate equal to 2.5 percent. What is the yield to maturity for Treasury bonds that mature at the end of (a) 2023 (a five-year bond) and (b) 2024 (a six-year bond)? Assume the bonds have no risks.

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