Question
The table below shows the current coupon yields to maturity and spot rates of interest for six U.S. Treasury securities. Assume all securities pay interest
The table below shows the current coupon yields to maturity and spot rates of interest for six U.S. Treasury securities. Assume all securities pay interest annually.
| YIELDS TO MATURITY AND SPOT RATES OF INTEREST | |||||
| Term to Maturity | Current Coupon Yield to Maturity | Sport Rate of Interest | |||
| 1 | -year Treasury | 5.00 | % | 5.00 | % |
| 2 | -year Treasury | 5.65 | 5.69 | ||
| 3 | -year Treasury | 6.20 | 6.24 | ||
| 5 | -year Treasury | 6.55 | 6.62 | ||
| 10 | -year Treasury | 7.05 | 7.21 | ||
| 30 | -year Treasury | 7.35 | 7.71 | ||
Compute the two-year implied forward rate three years from now, given the information provided in the preceding table. Do not round intermediate calculations. Round your answer to two decimal places.
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
125927716X, 978-1259687969, 1259687961, 978-1259277160
