Question

# Interest rates on 4-year Treasury securities are currently 6.4%, while 6-year Treasury securities yield 7.4%. The...

Interest rates on 4-year Treasury securities are currently 6.4%, while 6-year Treasury securities yield 7.4%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

 Expectations Theory 4-yr. Treasury security yield 6.40% 6-yr. Treasury security yield 7.40% Algebraic solution: Total return earned on 6-year securities Total return earned on 4-year securities Yield on 2-yr. securities, 4 years from now Geometric solution: 1 + Total return earned on 6-year securities 1 + Total return earned on 4-year securities Yield on 2-yr. securities, 4 years from now

If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

#### Earn Coins

Coins can be redeemed for fabulous gifts.