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Today's (t) interest rates on one- and two-year discount Treasury bonds are 1% and 1.4%, respectively. People expect that the one-year interest rate will be
Today's (t) interest rates on one- and two-year discount Treasury bonds are 1% and 1.4%, respectively. People expect that the one-year interest rate will be 1.2% one year from today (t + 1), and 2% two years from today (t + 2). a. Calculate the term premium for the two-year T-bonds. b. Suppose that the term premium for three-year T-bonds is 0.5%. Calculate today's interest rates on three-year T-bonds. Today's (t) interest rates on one- and two-year discount Treasury bonds are 1% and 1.4%, respectively. People expect that the one-year interest rate will be 1.2% one year from today (t + 1), and 2% two years from today (t + 2). a. Calculate the term premium for the two-year T-bonds. b. Suppose that the term premium for three-year T-bonds is 0.5%. Calculate today's interest rates on three-year T-bonds
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