one-year Treasury note yields 0.12% (0.0012 in decimal form), the two-year note

ID: 2658952 • Letter: O

Question

one-year Treasury note yields 0.12% (0.0012 in decimal form),

the two-year note yields 0.40% (0.0040),

the three-year note yields 0.78% (0.0078),

the five-year note yields 1.60% (0.0160),

the seven-year note yields 2.22% (0.0222) and

the ten-year note yields 2.81% (0.0281).

a) What is the expected yield on a one-year note delivered one year from now?

b) What is the expected yield on a one-year note delivered two years from now?

c) What is the expected yield on a three-year note delivered two years from now?

d)What is the expected yield on a two-year note delivered five years from now?

e) What is the expected yield on a five-year note delivered five years from now?

f) What is the expected yield on a seven-year note delivered three years from now?

a) expected yield on a one-year note delivered one year from now=0.40%-0.12%=0.28%

b)expected yield on a one-year note delivered two years from now=0.78%-0.40%=0.38%

c)expected yield on a three-year note delivered two years from now=1.6%-0.40%=1.2%

d)expected yield on a two-year note delivered five years from now=2.22%-1.6%=0.62%

e)expected yield on a five-year note delivered five years from now=2.81%-2.22%=0.59%

f)expected yield on a seven-year note delivered three years from now=2.81%-0.78%=2.03%

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