1. The following table shows the yield to maturity (YTM) of various types of bonds on March 15, 2022. 2-year 5-year 10-year U.S. Treasury Corp. AAA Corp. AA 2.216% 2.704% 3.159% 1.852% 2.107% 2.146% 2.117% 2.535% 2.942% The YTM of a 3-month T-bill is 0.46%. a. What is the expected yield of a three-year Treasury two years from the date above according to the pure expectations theory? b. What is the risk premium of a 5-year T-note? e. What explains the 0.428% difference in YTM between a 5-year U.S. Treasury and a 5-year AAA corporate bond?

1. The following table shows the yield to maturity (YTM) of various types of bonds on March 15, 2022. 2-year 5-year 10-year U.S. Treasury Corp. AAA Corp. AA 2.216% 2.704% 3.159% 1.852% 2.107% 2.146% 2.117% 2.535% 2.942% The YTM of a 3-month T-bill is 0.46%. a. What is the expected yield of a three-year Treasury two years from the date above according to the pure expectations theory? b. What is the risk premium of a 5-year T-note? e. What explains the 0.428% difference in YTM between a 5-year U.S. Treasury and a 5-year AAA corporate bond?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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h
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