Suppose today is January 3, 2012, and investors expect the annual risk-free interest rates in 2016 and

Question:

Suppose today is January 3, 2012, and investors expect the annual risk-free interest rates in 2016 and 2017 to be:
Year 1-Year Rate (rRF)
2016....................4.5%
2017......................2.3
Currently a four-year Treasury bond that matures on December 31, 2015 has an interest rate equal to 2.5 percent. What is the yield to for Treasury bonds that mature at the end of (a) 2016 (a five-year bond) and (b) 2017 (a six-year bond)? Assume the bonds have no risks.
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...