P6-8

P6-8 D. Lader eacn curve in pari a with its generar snape (downwara sioping, upwara sloping, flat). c. Describe the general interest rate expectation existing at each of the three times assuming the expectations theory holds. d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? LG 1 Term structure A 1-year Treasury bill currently offers a 5% rate of return. A 2-year Treasury note offers a 5.5% rate of return. Under the expectations theory, what rate of return do investors expect a 1-year Treasury bill to pay next year? LG 1 Risk premiums In January 2016, Anheuser-Busch issued an outstanding bond that pays a 3.3% coupon rate, matures in January 2023, and has a yield to maturity of 2.82%. In January 2017, Santander Holdings issued an outstanding bond that pays a 3.571% coupon rate, matures in January 2023, and has a yield to maturity of 3.341%. a. Does the Anheuser-Busch bond sell at a premium, at par, or at a discount? How do you know? What about the Santander bond? O P6-9 25