Question

One-year Treasury securities yield 6%. The market anticipates that 1-year from now 1-year Treasury securities will yield 7.5%. If the pure expectations theory is correct, what should be the yield today for 2-year Treasury securities?

The real risk-free rate of interest is 1.7%. Inflation is expected to be 5% this year and 6% during the next 2 years. Assume that the maturity risk premiums is zero. What is the yield on 1-year treasury securities?

Suppose you and other investors expect that inflation will be 3% next year, to rise to 5% during the following year and then to remain at 6.3% thereafter. Further you expect that the real risk free rate of interest will remain at 2% and the maturity risk premium on treasury securities will rise from .2% for one year bonds. Maturity risk premiums are expected to increase 0.2% for each year to maturity up to a limit of 1.0 percentage point on 5-year or longer term T-bonds.

Answer 1

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

THIRD QUESTION IS NOT COMPLETE, I HAVE CALCULATE RATE FOR 5 YEAR SECURITY. IF QUESTION IS DIFFERENT, PLEASE, LET ME KNOW, WILL SOLVE IT