If the expected path of 1-year interest rates over the next five years is 1%, 2%, 3%, 4%, and 5%, the expectations theory predicts which maturity of bond with the highest interest rate today? Assume that liquidity premium for the bonds of 1 to 5 years to maturity is 0%, 0.1%, 0.13% 0.2%, and 0.3% respectively, calculate YTM of 1 to 5 year bonds.
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