E6–2 The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253.
a. Use the information to plot a yield curve for this date.
b. If the expectations hypothesis is true, approximately what rate of return do investors expect a 5-year Treasury note to pay 5 years from now?
c. If the expectations hypothesis is true, approximately (ignoring compounding) what rate of return do investors expect a 1-year Treasury security to pay starting 2 years from now?
d. Is it possible that even though the yield curve slopes up in this problem, investors do not expect rising interest rates? Explain.
Click here for the solution: The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253
