Interest rates one year from now using expectation theory

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Reference no: EM131837443

The yield curve for Treasury bonds shows that yield for one year bonds(T-bills) is 2% and the yield for 2,3,4 and 5 year bonds(T-notes) is 3%,4%,4.5% and 4.5% percent respectively.

(a) Calculate the expected one year and two year interest rates one year from now using expectation theory

(b) Calculate a one year expected rate two years from now using expectation theory

Reference no: EM131837443

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