What is the yield on a four-year bond

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Suppose today is January 2, 2020, and currently a three-year Treasury bond that matures on December 31, 2020 has a yield equal to 2.9 percent. If investors expect the one-year (12-month) nominal risk-free rate of return to be 2.5 percent in 2023, what is the yield to maturity for Treasury bonds that mature at the end of 2023? That is, what is the yield on a four-year bond? Assume the Treasury bonds do not have maturity risk premiums.

Reference no: EM132481904

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