Suppose the interest rate on a 1-year t-bond
1,Suppose the interest rate on a 1-year T-bond is 3.0% and that on a 2-year T-bond is 5.0%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.2% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now? 2. Silver Streak Inc. has a bond outstanding with 15 […]