The yield on 1-year US government securities is 6.3%. The yield on 3-year US gov
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Question
The yield on 1-year US government securities is 6.3%. The yield on 3-year US government securities is 6.8%. Financial markets expect the 2-year yield one year from now to be % (Key point: This yield is referred to as the implied 1-year forward, 2-year yield. It is the two-year yield expected to prevail in one year.)
The price which most closely reflects this yield is the spot price of treasury bills spot price of 2 yr treasury notes spot price of 5 yr treasury notes price of the Dec 2015, treasury bill futures contract price of the Dec 2015, 2-yr treasury note futures contract price of the Dec 2015, 5-yr treasury note futures contract price of the Dec 2016, treasury bill futures contract price of the Dec 2016, 2-yr treasury note futures contract price of the Dec 2016, 5-yr treasury note futures contract (Two items scored jointly.)
The yield on US Treasury bills that mature in June of 2016 (240 days) is 5.9%. The yield on treasury bills that mature in March of 2016 (150 days) is 5.6%. Financial markets expect the yield in March for 90 day treasury bills to be %. This implies that the current price quote (IMM Index)for the March June September December futures contract should be . (Key point: The price of the futures contract reflects the spot yield expected to prevail at contract maturity. The connection between yield and quoted price for treasury bills is straight forward. (Three items scored jointly.)
The anticipated June 2016 90-day LIBOR (an add on yield) is 6.2%. The quoted price of the March June Sept Dec Eurodollar futures contract should be (Key point: Add-on yields can be converted to discount yields. The connection between the discount yield and the eurodollar price quote(IMM Index) is straightforward.) (Two items scored jointly.)
Explanation / Answer
The yield on 1-year US government securities is 6.3%. The yield on 3-year US gov
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