Question
Please show computations in Excel formula. Question 1: Part 1: The real risk-free rate (r*) is 1.95% and inflation is expected to be 2.70% this
Please show computations in Excel formula.
Question 1:
Part 1: The real risk-free rate (r*) is 1.95% and inflation is expected to be 2.70% this year and 3.75% during the next 2 years. Assume that the maturity risk premium is year. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?
Part 2: One-year Treasury securities yield 5.35%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6.05%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average.
Please show computations in Excel formula.
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