Question

Today is January 2, 2015, and according to the results of a recent survey, investors expect the annual interest rates for the years 2018 through 2020 to be:
Year One-Year Rate
2018 ......... 5.0%
2019 ......... 4.0
2020 ......... 3.0
The rates given here include the risk-free rate, rRF, and appropriate risk premiums. Today, a three-year bond—that is, a bond that matures on December 31, 2017—has an interest rate equal to 6 percent. What is the yield to maturity for bonds that mature at the end of 2018, 2019, and 2020?



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  • CreatedNovember 24, 2014
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