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5-4: Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year 2026 2027 One-Year Rate (IRE) 4.5% 2.3% Currently a four-year Treasury bond that matures on December 13, 2025 has an interest rate that equal to 2.5 percent. What is the yield on Treasury bonds that mature at the end of (a) 2026 (a five- year bond) and (b) 2027 (a six-year bond)? Assume the bonds have no risk. (LO 5-3)

5-4: Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year 2026 2027 One-Year Rate (IRE) 4.5% 2.3% Currently a four-year Treasury bond that matures on December 13, 2025 has an interest rate that equal to 2.5 percent. What is the yield on Treasury bonds that mature at the end of (a) 2026 (a five- year bond) and (b) 2027 (a six-year bond)? Assume the bonds have no risk. (LO 5-3)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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5-4: Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year 2026 2027 One-Year Rate (IRE) 4.5% 2.3% Currently a four-year Treasury bond that matures on December 13, 2025 has an interest rate that equal to 2.5 percent. What is the yield on Treasury bonds that mature at the end of (a) 2026 (a five- year bond) and (b) 2027 (a six-year bond)? Assume the bonds have no risk. (LO 5-3)
Transcribed Image Text:5-4: Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year 2026 2027 One-Year Rate (IRE) 4.5% 2.3% Currently a four-year Treasury bond that matures on December 13, 2025 has an interest rate that equal to 2.5 percent. What is the yield on Treasury bonds that mature at the end of (a) 2026 (a five- year bond) and (b) 2027 (a six-year bond)? Assume the bonds have no risk. (LO 5-3)
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