Question
If you want to forecast the yield on a 1year security in one year from now, you need to build the following equation: = .
If you want to forecast the yield on a 1year security in one year from now, you need to build the following equation:
= . And the yield on 1year security in one year would be ______.
If you want to forecast the yield on a 1year security two years from now, you need to build the following equation:
= . And the yield on 1year security in two years would be _______.
If you want to forecast the yield on a 2year security one year from now, you need to build the following equation:
= . And the yield on 2year security in one year would be _______.
If you want to forecast the yield on a 3year security one year from now, you need to build the following equation:
= . And the yield on 3year security in one year would be ________.
****The pictures have the drop down options
(1+0.0600)(1+0.0710)(1+y)(1+0.0710)(1+y)3(1+0.0600)2(1+y)(1+0.0710)2(1+y) \begin{tabular}{c} (1+0.0710)2 \\ (1+0.0710)3(1+0.0600)2(1+0.0470) \\ \hline(1+0.0470)3 \end{tabular} (1+0.0710)(1+r)2(1+0.0470)(1+r)3(1+0.0600)2(1+r) \begin{tabular}{l} (1+0.0710)(1+z)3 \\ \hline(1+0.0470)(1+z)2 \\ \hline(1+0.0600)2(1+z) \\ (1+0.0470)(1+z)3 \end{tabular} Suppose you are given the yields on the following Treasury securities. For simplicity, assume that there is no maturity risk premium. 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: If you want to forecast the yield on a 2-year security one year from now, you need to build the following equation: 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 (1+0.0470)(1+x) (1+0.0600)2(1+x) (1+0.0470)(1+x)2 (1+0.0470)(1+0.0600)(1+x) \begin{tabular}{c} (1+0.0470)(1+0.0710)3 \\ \hline(1+0.0470)4 \\ \hline(1+0.0710)4 \\ (1+0.0830)4 \end{tabular} \begin{tabular}{c} (1+0.0600) \\ \hline(1+0.0600)2 \\ \hline(1+0.0470)(21) \\ \hline(1+0.0470)2 \end{tabular} \begin{tabular}{c} (1+0.0710)2 \\ (1+0.0710)3 \\ (1+0.0470)3 \\ \hline(1+0.0600)2(1+0.0470) \end{tabular}Step by Step Solution
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