(1.) Consider the following annualized spot yields:
Maturity | Annualized Spot Rate |
One Year | 5.00% |
Two Years | 5.50% |
Three Years | 6.00% |
Four Years | 6.00% |
Five Years | ? |
(a.) Assuming the expectations theory of the term structure is
correct, calculate the expected one-year interest rate one year
from now (i.e. 1f2).
(b.) Assuming the expectations theory of the term structure is
correct, calculate the expected one-year interest rate three years
from now (i.e. 3f4).
(c.) Suppose a forecasting service predicts that th eone-year
interest rate four years from now will be 5.00%. Based on this
forecast, ascertain what the five-year spot yield must be if bond
prices permit no arbitrage.
(1.) Consider the following annualized spot yields: Maturity Annualized Spot Rate One Year 5.00% Two Years...
The one-year, two-year, three-year, and four-year spot rates for the theoretical spot rate curve are 5.0%, 6.0%, 6.5%, and 7%, respectively. According the expectations theory for the term structure of interest rates, what is the expected 2-year interest rate 2 years from today? Assume annual compounding.
Suppose the term structure of interest rates has these spot interest rates: rı = 5.00%, r2 = 5.40%, r3 = 5.70%, r4 = 5.90% and r5 = 6.00%. a. What will be the 1-year spot interest rate in three years if the expectations theory of term structure is correct? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 1-year spot in 3 years b. If investing in long-term bonds carries additional risks, then...
Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=6.95%, E(2r1) =7.45%, E(3r1) =8.45% E(4r1)=8.95% Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?
Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=4.40%, E27) =5.40%, E37)=5.90%, E471)=6.25% Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities? Multiple Choice 5.4852% 0 5.4875% 0 6.2500% 0 1.5270%
The one-year spot interest rate is r1 = 6.6% and the two-year rate is r2 = 7.6%. If the expectations theory is correct, what is the expected one-year interest rate in one year’s time?
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e. years 2, 3, and 4, respectively) are as follows: IRI . 0.58, E(2r 1) . 1.51, E(3r1)-9.9%, E(4r1 ) . 10.25% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 3 decimal places. (e.g., 32.161) Current (Long-Term) Rates One-year Two-year Three-year Four-year
The one-year spot interest rate is r1 = 6.0%, and the two-year rate is r2 = 7.0%. If the expectations theory is correct, what is the expected one-year interest rate in one year’s time? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected interest rate %
1) The 9-year spot interest rate is 5.44%, the 3-year spot rate is 3.61%. What is the forward rate you can find using the pure expectations theory? Round to the nearest 0.01%. E.g., if your answer is 5.78%, enter it as 5.78. 2) The 8-year spot interest rate (the longer of the spot rates, or the n-year rate) is 5.35% and the 3-year (k-year) forward rate expected (n - k) years from now has been estimated to be 6.98%. What...
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 3.18%, E(2r1) = 4.60%, E(3r1) = 5.10%, E(4r1) = 6.60% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-Term) Rates 1 _____.__% 2 _____.__% 3...
Currently, the one year spot rate is 0.50% per year and the two year spot rate is 1.00% per year. What is the expected one-year spot rate starting one year from today under the Pure Expectations Theory?