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Excel Online Structured Activity: Expectations Theory Interest rates on 4-year Treasury securities are currently 6.95%, while 6-year Treasury securities yield 7.65%. The data has been
Excel Online Structured Activity: Expectations Theory Interest rates on 4-year Treasury securities are currently 6.95%, while 6-year Treasury securities yield 7.65%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet 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. % Check My Work Reset Problem B E N 3 4.95% 6.95% 5 8.30% Interest rate premiums 2 5-year Treasury yield (Ts) 4 10-year Treasury yield (T10) 10-year Corporate yield (10) 6 Inflation Premium over 10 years (IP 10) 7 Maturity Risk Premium (MRP) 8 DRP Treasury 9 LP Treasury 10 DRP C5 + LP C5 = DRP 11 Real risk-free rate, r* 13 14 Inflation premium over 5 years (IP) 15 16 DRP 0 + LP 10 17 18 5-year Corporate yield (Cs) 19 2.85% 0.00% 0.00% 0.00% C10 +LP C10 Formulas #N/A 12 #N/A #N/A #N/A
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