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Suppose you are given the yields on the following Treasury securities. For simplicity, assume that there is no maturity risk premium. Yield Security (Percent) 1-year

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Suppose you are given the yields on the following Treasury securities. For simplicity, assume that there is no maturity risk premium. Yield Security (Percent) 1-year 4.50 2-year 5.90 3-year 7.10 4-year 8.40 If you want to forecast the yield on a 1-year security in one year from now, you need to build the following equation: (1+0.05907 (1 +0.0450) x (1 + . And the yield on 1-year security in one year would be If you want to forecast the yield an a 1-year security two years from now, you need to build the following equation: And the yield on 1-year security in two years would be If you want to forecast the yield on a 2-year security one year from now, you need to build the following equation: . And the yield on 2-year security in one year would be If you want to forecast the yield on a 3-year security one year from now, you need to build the following equation And the yield on 3-year security in one year would be

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