The yield on 2-year Treasury notes is 1% and the yield on 5-year Treasury notes is...
The yield on 2-year Treasury notes is 1% and the yield on 5-year Treasury notes is 1.8%.
What is the implied annual return on a 3-year security two years from now?
Homework Answers
Implied annual return:
= ((1+1.8%)^5/(1+1%)^2)^(1/3)-1
= 2.34%
Hence, implied annual return on 3-year security two years from now is 2.34%
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