Question
Suppose that the expectations hypothesis holds and that the current term structure of interest rates is as follows: y1 = 5% y2 = 6% y3
Suppose that the expectations hypothesis holds and that the current term structure of interest rates is as follows:
y1 = 5%
y2 = 6%
y3 = 7%
a. What is the expected value of the two-year spot rate realizing at year one, E(1y3)?
b. What is the expected price of a two-year zero-coupon bond with a face value of $100 trading at year one?
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Applied International Finance
Authors: Thomas J O'Brien
1st Edition
1606497340, 9781606497340
