Today is January 1, 2012, and according to the results of a recent survey, investors expect the annual interest rates for the years 2015 through 2017 to be:
Year One-Year Rate
2015.....................5.0%
2016........................4.0
2017........................3.0
The rates given here include the risk-free rate, rRF, and appropriate risk premiums. Today, a three-year bond-that is, a bond that matures on December 31, 2014-has an interest rate equal to 6 percent. What is the yield to maturity for bonds that mature at the end of 2015, 2016, and 2017?