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Find the yield rates of U.S. Treasury Securities of 1-year, 2-year, and 3-year maturity on 4- Sep-2018 at www.treasury.gov Maturity (year) Yield Rate 1 2.49

Find the yield rates of U.S. Treasury Securities of 1-year, 2-year, and 3-year maturity on 4- Sep-2018 at www.treasury.gov

Maturity (year) Yield Rate
1 2.49
2 2.66
3 2.73

Question 1

Sketch the yield rates in form of a yield curve, show the sloping of the yield curve.

Question 2

Assumes pure expectation theory is right. What is the expected one-year yield rate one year from now? What is the expected one-year yield rate two years from now?

Question 3

What could you conclude from your finding in Question 2 and Question 3 about the slope of yield curve and expected future one-year interest rates?

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