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Pure Expectations Theory The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, 3-year securities yield 6.3%, and 4-year securities yield 6.5%. There
Pure Expectations Theory
The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, 3-year securities yield 6.3%, and 4-year securities yield 6.5%. There is no maturity risk premium. Using expectations theory and geometric averages, forecast the yields on the following securities:
a. 1 year security, 1 year from now
b. 1 year security, 2 years from now
c. 2 year security, 1 year from now
d. A 3 year security , 1 year from now
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