According to the pure expectations theory of interest rates, how much do you expect to pay for

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According to the pure expectations theory of interest rates, how much do you expect to pay for a one-year STRIPS on November 15, 2016? What is the corresponding implied forward rate? How does your answer compare to the current yield on a one-year STRIPS? What does this tell you about the relationship between implied forward rates, the shape of the zero coupon yield curve, and market expectations about future spot interest rates?

U.S. Treasury STRIPS, close of business November 15, 2015:

Price Price Maturity November '19 Maturity November '16 99.471 95.035 November '20 November '21 November '17 98.782 92.5

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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Fundamentals of Investments, Valuation and Management

ISBN: 978-1259720697

8th edition

Authors: Bradford Jordan, Thomas Miller, Steve Dolvin

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