If the one-year interest rate is expected to be the same as the yield curve over the
Question:
If the one-year interest rate is expected to be the same as the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now? b. What interest rate is expected on a three-year bond one year from now? c. What relationship do you find between interest rates and maturity? d. If investors attach term premiums of 2.5%, 1.75% and 2.85% to the one-, two- and three- year bonds: i. What would be the interest rate on a two-year security? ii. What would be the interest rate on a three-year security? iii. What is the forward rate for one-year Canada bonds one year from now? iv. What is the adjusted forward rate for one-year Canada bonds one year out?
Q: What is your recommended minimum interest rate for the five-year fixed rate loans? b. How would this rate be adjusted for customers that have some credit risk?
Essentials of Investments
ISBN: 978-0078034695
9th edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus