The current interest rate on the one-year bond is 5%. The 1-yr interest rates over...
60.1K
Verified Solution
Link Copied!
Question
Accounting
The current interest rate on the one-year bond is 5%. The 1-yr interest rates over the next four years are expected to be 6%,7%,8%, and 9% (i.e. it+1e=6% ) Suppose it and it+1c increase both by 1 percent point ( 5% to 6%, and 6% to 7% respectively). Also, people have adjusted their expectation for the third year and now it+2e=5% According to the Expectations Theory, what is the change in the interest rate on a 3-yr bond? For example, if the initial interest rat is 5.42% and the new interest rate is 8.73%, the change is 3.31%. You would input 3.3 (round the nearest decimal, no \% symbol)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
