The Wall Street Journal reports that the rate on 3-year Treasury securities is 1.50 percent and the rate on 5- year Treasury securities is 2.45 percent. According to the unbiased expectations theory, what does the market expect the 2-year Treasury rate to be three years from today, E(3/2)? (Do not round intermediate calculations and round your answer to 2 decimal places.)

The Wall Street Journal reports that the rate on 3-year Treasury securities is 1.50 percent and the rate on 5- year Treasury securities is 2.45 percent. According to the unbiased expectations theory, what does the market expect the 2-year Treasury rate to be three years from today, E(3/2)? (Do not round intermediate calculations and round your answer to 2 decimal places.)

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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An investor in Treasury securities expects inflation to be 1.8% in Year 1, 2.6% in Year 2, and 3.75% each year thereafter. Assume that the real risk-free rate is 2.35% and that this rate will remain constant. Three-year Treasury securities yield 6.60%, while 5-year Treasury securities yield 8.00%. What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3? Do not round intermediate calculations. Round your answer to two decimal places.
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.35 percent, and the bond has a yield to maturity of 4.52 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations, Round your answers to 4 decimal places.) Answer is not complete. Macaulay duration Modified duration 12.2800
2. On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows: 1R1 = 1.21%, 1R2 = 1.73%, 1R3 = 1.97%, 1R4 = 2.08% Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years two, three, and four as of March 11, 20XX.
A recent edition of the Wall Street Journal reported interest rates of 2.5%, 2.80%, 3.0%, and 3.25% for the three-year, four-year, five-year, and six-year Treasury note yields, respectively, According to the unbiased expectation theory of the term structure of interest rates, what are the expected one-year rate during years 4 and 5?
Data table (Click on the icon here into a spreadsheet.) in order to copy the contents of the data table below Maturity Yield Real rate of interest 3 months 1.27% 0.87% 6 months 1.63 0.87 2 years 2.47 0.87 3 years 2.73 0.87 5 years 3.82 0.87 10 years 4.36 0.87 30 years 5.35 0.87
On December 8, 2021, the yields on Treasury bonds with different maturities were as follows: Maturity 1 Month 1 Year 2 Years 5 Years 10 Years YTM 0.04% 0.29% 0.68% 1.27% 1.52% 30 Years 1.87% Which of the following statements is an appropriate interpretation of these data? The market is expecting future short-term rates to decrease. The market is expecting a recession in the near future. The market is not expecting future short-term rates to decrease. The risk of default is rising over time. The market demands a short-term risk premium.
Treasury securities that matures in 8 years currently have a rate of 11.9 %. Inflation is expected to be 5 percent each of the next 3 years and 6 percent each year after the 3rd year. The maturity risk premium is estimated to be 0.2 (t-1). Where t is the zero. The real risk rate is assumened to be tconsint over time what is the risk free rate of interest. a. 6. 28 b. 4.88 C. 2.51 D. 4.68
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Currently, 3-year Treasury securities yield 9%, 7-year Treasury securities yield 8.6%, and 10-year Treasury securities yield 8.3%. If the expectations theory is correct, what does the market expect will be the yield on 7-year Treasury securities three years from today? O 8.60% O 8.00% O 8.40% O 8.20% O 8.80%
Interest rates on 4-year Treasury securities are currently 5.6%, while 6-year Treasury securities yield 7.85%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. %
One-year Treasury bills currently earn 5.50 percent. You expect that one year from now, one-year Treasury bill rates will increase to 5.75 percent. If the unbiased expectations theory is correct, what should the current rate be on two-year Treasury securities? 5.50% 5.625% 5.75% 11.25%
The current one-year T-bill rate is .50 percent and the expected one-year rate 12 months from now is 1.38 percent. According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Current rate= %

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