What do bond traders expect interest rate on five-year bond

Reference no: EM13206850

In May 2012, the yields to maturity in the table below were recorded on Treasury discount bonds. If the expectations theory of the term structure holds, what do bond traders expect the interest rate on five-year discount bonds to be in May 2017, May 2022, May 2027, May 2032, and May 2037? Do bond traders expect the Federal Reserve to lose control of the inflation rate after 2017? Explain. In your explanation, suppose that after May 2017 the real interest rate will average two percent per annum.

Maturity Date
Yield to Maturity (%/year)
May 2017
0.88
May 2022
2.12
May 2027
2.89
May 2032
3.15
May 2037
3.30
May 2042
3.32

Reference no: EM13206850

Questions Cloud

Explain the two causes of market failures : Explain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously What divergences arise between equilibrium output and efficient output when (a) negative externalities a..

What is the cost of one more automobile : If the economy is at point C, what is the cost of one more automobile Of one more forklift Please explain where you get the numbers from to solve for each Explain how the production possibilities curve reflects the law of increasing opportunity cos..

Five competative forces : "Draw a five forces diagram for analysis of the retail car industry in the greater Johannesburg area and breifly discuss the nature and strength of each of the five competative forces."

Why do regulations on alcohol purchasing vary state to state : Why do regulations on alcohol purchasing vary state to state? And what are the consequences for not following the regulations?

What do bond traders expect interest rate on five-year bond : In May 2012, the yields to maturity in the table below were recorded on Treasury discount bonds. If the expectations theory of the term structure holds, what do bond traders expect the interest rate on five-year discount bonds to be in May 2017, M..

Describe how evolving learning trip travel trends : Describe how evolving "learning trip" travel trends in the 21st century affect the strategies of tourism destinations to meet the new demands. Provide relevant examples.

Explain three factors of subordinate group creation : List and briefly explain three factors of subordinate group creation as defined by schaefer(2006) along with three consequences mentioned in the readings

Scientists conduct experiments to collect evidence : Scientists conduct experiments to collect evidence.which of the following is the best definition of the word experiment as used by scientists?

Insider to music tradition hear it differently from outsider : How might an "insider" to a music tradition hear it differently from an "outsider"? Are both perspectives necessary for a complete picture?

User Account

All Pages