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 2.1 Currently, a four-year Treasury bond that matures on December 31, 2025 has an interest rate equal to 3.0 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. _____ %
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 2.1 Currently, a four-year Treasury bond that matures on December 31, 2025 has an interest rate equal to 3.0 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
Problem 1PS
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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 | 2.1 |
Currently, a four-year Treasury bond that matures on December 31, 2025 has an interest rate equal to 3.0 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:**Interest Rate Projections and Treasury Bond Yield Calculations**
**Projected Annual Nominal Risk-Free Interest Rates for 2026 and 2027:**
- **Year:** 2026
- **One-Year Rate (rRF):** 4.5%
- **Year:** 2027
- **One-Year Rate (rRF):** 2.1%
**Current Market Condition:**
- A four-year Treasury bond that matures on December 31, 2025, is observed to have an interest rate of 3.0%. These bonds are assumed to be risk-free.
**Questions:**
a. **Yield on Treasury Bonds Maturing at the End of 2026 (Five-Year Bond)**
- Calculate and round your answer to one decimal place.
- **Answer: _______ %**
b. **Yield on Treasury Bonds Maturing at the End of 2027 (Six-Year Bond)**
- Calculate and round your answer to one decimal place.
- **Answer: _______ %**
Use the given interest rate projections to help determine the yields for the specified Treasury bonds based on their maturity periods.
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