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FINANCIAL MARKET EXCERSISES Help me on this task pls! Given the information above, use the expectations hypothesis to calculate and predict interest rates as follows:
FINANCIAL MARKET EXCERSISES
Help me on this task pls!
- Given the information above, use the expectations hypothesis to calculate and predict interest rates as follows:
- If the one-year interest rate is expected to be as in the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now?
- What interest rate is expected on a three-year bond one year from now?
- If investors attach term premiums of 0.0075, and 0.0085 to the two- and three-year bonds:
- What would be the interest rate on two-year bonds?
- What would be the interest rate on three-year bonds?
- What is the forward rate for two-year bonds one year from now?
Interest rate (%) \begin{tabular}{|c|c|} \hline Maturity & Yield (\%/year) \\ \hline 1 year & 3,9 \\ \hline 2 year & 4,1 \\ \hline 3 year & 4,6 \\ \hline 4 year & 4,75 \\ \hline 5 year & 5,1 \\ \hline \end{tabular}
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