11.The yield to maturity on one-year, zero-coupon bonds is 5%. The yield to maturity on two- year, zero-coupon bonds is 6%. The yield to maturity on three-year, zero-coupon bonds is 6.5%. The yield to maturity on four-year, zero-coupon bonds is 7%. According to the expectations hypothesis, what is the market’s expectation of the one year interest rate two years from now? A) 6.00% B) 7.01% C) 7.51% D) 8.51%
11.The yield to maturity on one-year, zero-coupon bonds is 5%. The yield to maturity on two- year, zero-coupon bonds is 6%. The yield to maturity on three-year, zero-coupon bonds is 6.5%. The yield to maturity on four-year, zero-coupon bonds is 7%. According to the expectations hypothesis, what is the market’s expectation of the one year interest rate two years from now? A) 6.00% B) 7.01% C) 7.51% D) 8.51%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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11.The yield to maturity on one-year, zero-coupon bonds is 5%. The yield to maturity on two-
year, zero-coupon bonds is 6%. The yield to maturity on three-year, zero-coupon bonds is 6.5%.
The yield to maturity on four-year, zero-coupon bonds is 7%. According to the expectations
hypothesis, what is the market’s expectation of the one year interest rate two years from now?
A) 6.00%
B) 7.01%
C) 7.51%
D) 8.51%
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