Calculation Problems

Assume that the yields on US Treasury securities are currently as follows:

Tenor

Yield

$1$ Year

$4\mathrm{.}8\%$

$2$ Year

$4\mathrm{.}3\%$

$3$ Year

$4\mathrm{.}2\%$

$4$ Year

$4\mathrm{.}1\%$

$5$ Year

$4\mathrm{.}0\%$

If the expected US inflation in $2023$ is $3\%,$ what is the real return on $1$ Year treasuries?

Using the pure expectation theory calculate the expected yield on $1-$Year treasury securities in $1,2,3,$ and $4$ years from now.

Using the pure expectation theory calculate the expected yield on $2-$Year treasury securities in $1,2,$ and $3$ years from now.

Using the pure expectation theory calculate the expected yield on $3-$Year treasury securities in $1$ and $2$ years from now.

A corporation is planning to issue a three$-$year bond to investors. If the default risk premium is expected to be $5\%,$ the liquidity premium is $0\mathrm{.}8\%,$ and there is an $0\mathrm{.}4\%$ tax adjustment, then what is the appropriate yield on this bond?

You need to choose between investing in a one$-$year municipal bond with a $5\%$ yield and a one$-$year corporate bond with a $8\%$ yield. If your marginal income tax rate is $30$ percent and no other differences exist between these two securities$,$ which would you invest in$?$