Today is January 1, 2009, and according to the results of a recent survey, investors expect the

Question:

Today is January 1, 2009, and according to the results of a recent survey, investors expect the annual interest rates for the years 2012–2014 to be as follows:

Year One-Year Rate

2012............................5.0%

2013..............................4.0

2014..............................3.0

The rates given here include the risk-free rate, r_RF, and appropriate risk premiums. Today a three-year bond—that is, a bond that matures on December 31, 2011—has an interest rate equal to 6 percent. What is the yield to maturity for bonds that mature at the end of 2012, 2013, and 2014?

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...