1 year Treasury rates are 1%, while 2 year Treasury rates are 7%. What is the...

1 year Treasury rates are 1%, while 2 year Treasury rates are 7%. What is the expected 1 year Treasury rate one year from today?

Solutions

Expert Solution

the Expected one year treasury one year from today =(1+2 Years Treasury)^2)/(1+1 years Treasury Rate)-1
=(1+ 7%)^2/(1+1%) -1 =13.36%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

1 year Treasury rates are 2%, while 2 year Treasury rates are 6%. What is the...

1 year Treasury rates are 2%, while 2 year Treasury rates are 6%. What is the expected 1 year Treasury rate one year from today?

Interest rates on 4-year Treasury securities are currently 7%, while 6-year Treasury securities yield 7.4%. If...

Interest rates on 4-year Treasury securities are currently 7%, while 6-year Treasury securities yield 7.4%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

Interest rates on 6-year Treasury securities are currently 1.72%, while 9-year Treasury securities yield 1.83%. If...

Interest rates on 6-year Treasury securities are currently 1.72%, while 9-year Treasury securities yield 1.83%. If the pure expectations theory is correct, what does the market believe that 3-year Treasury securities will be yielding 6 years from now?

Interest rates on 4-year Treasury securities are currently 6.4%,while 6-year Treasury securities yield 7.55%. If...

Interest rates on 4-year Treasury securities are currently 6.4%, while 6-year Treasury securities yield 7.55%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

Interest rates on 4-year Treasury securities are currently 5.6%, while 6-year Treasury securities yield 7.15%. If...

Interest rates on 4-year Treasury securities are currently 5.6%, while 6-year Treasury securities yield 7.15%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

Suppose 2-year Treasury bonds yield 5.3%, while 1-year bonds yield 3.6%. r* is 1%, and the...

Suppose 2-year Treasury bonds yield 5.3%, while 1-year bonds yield 3.6%. r* is 1%, and the maturity risk premium is zero. Negative expected inflation rates, if any, should be indicated by a minus sign. Using the expectations theory, what is the yield on a 1-year bond, 1 year from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. b. What is the expected inflation rate in Year 1? Do...

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2...

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2 year 0.4% 0.5% 0.6% 0.67% Assuming that Z-spread is equal to 45 basis points, calculate the bond’s arbitrage free price. Show calculations. Coupon Rate = 4.2% frequency; semi annual

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2...

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2 years 0.4% 0.5% 0.6% 0.7% Derive six-monthly forward rates, including six- months forward rate 6 month from now - 0.5f0.5, six-month forward rate 12 months from now - 1f0.5, and six-months forward rate 18 months from now - 1.5f0.5 for the bond. Show calculations. (4.5 marks)

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2...

Current (annualised) US Treasury spot rates are as follows: 6 months 1 year 18 months 2 years 0.4% 0.5% 0.6% 0.7% Bond Cashflows: Maturity: 2 years semi annual Par value: 100 Coupon: 1.625/2 = 0.8125 6 months from now = 0.8125 1 year from now = 0.8125 1.5 year from now= 0.8125 2 years from now = 100+0.8125 From the US treasury spot rates above and assuming Z-spread of 35 basis points, calculate appropriate discount rates (implied spot rates) for...

Treasury is: Spot 1-year Treasury is 4% Spot 2-year treasury is 4.5% B Corporate Debt interest...

Treasury is: Spot 1-year Treasury is 4% Spot 2-year treasury is 4.5% B Corporate Debt interest annually Spot 1 year 8.5%, Spot 2 years 9.5% Forward 1 Year maturity Let’s call the Treasury x The Corporate debt is called y What is the value of x the forward rate on one-year maturity Treasuries delivered in one year? What is the value of y the forward rate on one-year maturity B corporate debt delivered in one year? Exercising the term structure...

Subjects