Ch $06-$ Video Lesson $-$ Interest Rates

Suppose you are given the yields on the following Treasury securities$.$ For simplicity, assume that there is no maturity risk premium.

Yield

$\backslash$table$[[$Security$,($Percent$)],[1-$year,$5\mathrm{.}10],[2-$year,$6\mathrm{.}30],[3-$year,$7\mathrm{.}80],[4-$year,$9\mathrm{.}00]]$

If you want to forecast the yield on a $1-$year security in one year from now, you need to build the following equation:

If you want to forecast the yield on a $1-$year security two years from now, you need to build the following equation:

$=gra{d}_{?}$ And the yield on $1-$year security in two years would be

If you want to forecast the yield on a $2-$year security one year from now, you need to build the followifg equation:

$=$ And the ${?}_{(})$ the yield on $2-$year security in one year would be

If you want to forecast the yield on a $3-$year security one year from now, you need to build the following equation:

$=$

And the yield on $3-$year security in one year would be