Question
Today, interest rates on 1-year T-bonds yield 1.5%, interest rates on 2-year T-bonds yield 2.3%, and interest rates on 3-year T-bonds yield 3.3%. a. If
Today, interest rates on 1-year T-bonds yield 1.5%, interest rates on 2-year T-bonds yield 2.3%, and interest rates on 3-year T-bonds yield 3.3%.
a.If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations.
b.If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations.
c.If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations.
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds
11th Edition
1305262999, 1305262997, 035726164X, 978-1305262997
