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Suppose 1-year Treasury bonds yield 1 year from now is 3.00%, 1-year T-bond yield 2 years from now is 4%, and 1-year T-bond 3-year from
Suppose 1-year Treasury bonds yield 1 year from now is 3.00%, 1-year T-bond yield 2 years from now is 4%, and 1-year T-bond 3-year from now is 5%. Assuming the pure expectations theory is correct, and thus the maturity risk premium for T-bonds is zero, what is the yield on 3-year T-bond today (now)?
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
5th edition
