The following rates are actual yields on US yield curve observed on the dates given: 1 Mo

The following rates are actual yields on US yield curve observed on the dates given:

  

Transcribed Image Text:

1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 02/19/2021 0.03 0.03 0.04 0.06 0.07 0.11 0.22 0.59 0.98 1.34 1.98 2.14 08/08/2019 2.08 1.97 1.91 1.86 1.72 1.48 1.44 1.42 1.47 1.52 1.8 1.98 a) Plot the yield curves for 2 February 2021 and 8 August 2019. Interpret these yield curves on investor expectations with regards to the future state of the US economy. b) Given information about yields on 2-19-2021, calculate the expected 4-yar yield that the market is expecting between 19 February 2024 and 19 February 2028. Also calculate the 20-year yield that is expected to prevail between 19 February 2031 and 19 February 2041 under the expectations theory of the term structure of interest rates. 1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 02/19/2021 0.03 0.03 0.04 0.06 0.07 0.11 0.22 0.59 0.98 1.34 1.98 2.14 08/08/2019 2.08 1.97 1.91 1.86 1.72 1.48 1.44 1.42 1.47 1.52 1.8 1.98 a) Plot the yield curves for 2 February 2021 and 8 August 2019. Interpret these yield curves on investor expectations with regards to the future state of the US economy. b) Given information about yields on 2-19-2021, calculate the expected 4-yar yield that the market is expecting between 19 February 2024 and 19 February 2028. Also calculate the 20-year yield that is expected to prevail between 19 February 2031 and 19 February 2041 under the expectations theory of the term structure of interest rates.

Answer rating: 100% (QA)

a Provided Information 02192021 08082019 1 Mo 003 208 2 Mo 003 197 3 Mo 004 191 6 Mo 006 186 1 Year ... View the full answer