From the following information, find (a) yield on 1-year T-bonds one year from now; (b) yield on 2-year T-bonds one year from now; and (c) yield on 1-year T-bonds two years from now?
As on date today, interest rates on 1-year T-bonds yield 1.7% , interest rates on 2 -year T-bonds yield 2.15% , and interest rates on 3 -year T-bonds yield 3.8% .
As on date today, interest rates on 1-year T-bonds yield
1 Answer
(a)
Explanation:
We are given that today, interest rates on 1-year T-bonds yield
a. It is apparent that today yield on
Therefore
or
or
b. For the yield on
i.e.
and
c. For the yield on
or
or