Estimating the treasury rate for the market

Reference no: EM131797570

Question: 1. The yield on a one-year Treasury security is 4.4600%, and the two-year Treasury security has a 5.3500% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of the one-year Treasury rate one year from now?

2. Recall that on a one-year Treasury security the yield is 4.4600% and 5.3500% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.2000%. What is the market's estimate of the one-year Treasury rate one year from now?

3. Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now?

Reference no: EM131797570

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