Question: TREASURY YIELDS (in %) Date 1MO 2MO 3MO 6MO 1 YR 2 YR 3Y 5YR 7YR 10 YR 20 YR 30 YR 3/19/2021 0.01 0.01
| TREASURY YIELDS (in %) | ||||||||||||
| Date | 1MO | 2MO | 3MO | 6MO | 1 YR | 2 YR | 3Y | 5YR | 7YR | 10 YR | 20 YR | 30 YR |
| 3/19/2021 | 0.01 | 0.01 | 0.01 | 0.03 | 0.07 | 0.16 | 0.33 | 0.9 | 1.38 | 1.74 | 2.36 | 2.45 |
| LIQUIDITY PREMIUMS | ||||||||||||
| <= 1 yr | 0.00% | |||||||||||
| 2 yr | 0.08% | |||||||||||
| 3 yr | 0.10% | |||||||||||
| 5 yr | 0.15% | |||||||||||
| 7 yr | 0.20% | |||||||||||
| 10 yr | 0.35% | |||||||||||
| 20 yr | 0.80% | |||||||||||
| 30 yr | 1.00% | |||||||||||
Consider a recently published US Treasury yield curve and assume the liquidity premiums tabulated above.
ASSUMING that the liquidity premium theory of term structure applies, what is your forecast of the 7 year Treasury rate, 3 years from today?
Use geometric average returns and enter your answer in terms of percent and with 2 decimals places (e.g. if your answer is 5.32%, then enter 5.32 in the box).
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