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What is the yield to maturity for Treasury bonds

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Reference no: EM132697341

Problem - Suppose today is January 2, 2019, and investors expect the annual risk-free interest rates in 2023 and 2024 to be:

Year

One-Year Rate (rRF)

2023

4.5%

2024

2.3

Currently a four-year Treasury bond that matures on December 31, 2022 has an interest rate equal to 2.5 percent. What is the yield to maturity for Treasury bonds that mature at the end of

(a) 2023 (a five-year bond)

(b) 2024 (a six-year bond)? Assume the bonds have no risks.

Reference no: EM132697341

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