Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year One-Year Rate (rRF) 2026 4.5 % 2027 4.1 Currently, a four-year Treasury bond that matures on December 31, 2025 has an interest rate equal to 2.5 percent. Assume the bonds have no risk. What is the yield on Treasury bonds that mature at the end of 2026 (a five-year bond)? Round your answer to one decimal place. % What is the yield on Treasury bonds that mature at the end of 2027 (a six-year bond)? Round your answer to one decimal place. %

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
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4

Suppose today is January 2, 2022, and
investors expect the annual nominal risk-free
interest rates in 2026 and 2027 to be: Year
One-Year Rate (rRF) 2026 4.5 % 2027 4.1
Currently, a four-year Treasury bond that
matures on December 31, 2025 has an
interest rate equal to 2.5 percent. Assume the
bonds have no risk.
What is the yield on Treasury bonds that
mature at the end of 2026 (a five-year bond)?
Round your answer to one decimal place. %
What is the yield on Treasury bonds that
mature at the end of 2027 (a six-year bond)?
Round your answer to one decimal place. %
Transcribed Image Text:Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year One-Year Rate (rRF) 2026 4.5 % 2027 4.1 Currently, a four-year Treasury bond that matures on December 31, 2025 has an interest rate equal to 2.5 percent. Assume the bonds have no risk. What is the yield on Treasury bonds that mature at the end of 2026 (a five-year bond)? Round your answer to one decimal place. % What is the yield on Treasury bonds that mature at the end of 2027 (a six-year bond)? Round your answer to one decimal place. %
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