corporate finance.
posted by terra .
Suppose you observe the following
Maturity 1 year Yield 6.0%
Maturity 2 year Yield 6.2%
Maturity 3 years Yield 6.4%
Maturity 4 years Yield 6.5%
Maturity 5 years Yield 6.5%
What does the market expect will be the interest rate on 1yr. securities 1 year from now? What does the market expect will be the interest rate on 3yr. securiites 2 years from now?

I would say, "cant tell" The market could expect interest rate 2 years from now to be 6.0%. However, seeing two years in the future is more risky than 1 year. So, the higher yield in year 2 could easily be explained by the higher risk. Ditto for 3+ years.
Respond to this Question
Similar Questions

Finance
Bond Yields. An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100. a. What is the current yield on the bond? 
FINANCE
Current yield and yield to maturity A bond has a $1,000 par value, 10 years to maturity, a 7 percent annual coupon, and sells for $985. a. What is its current yield? 
Finance
An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100. a. What is the current yield on the bond? 
Finance
A bond has a $l000 par value, l0 years to maturity, a 7 percent annual coupon, and sells for $985. a. What is its current yield? 
Corporate Finance
The yieldtomaturity on a bond is the interest rate you earn on your investment if interest rates do not change. If you actually sell the bond before it matures, your realized return is known as the holding period yield. Suppose that … 
finance
Suppose Delta Company issued bonds with a 15year maturity, a Rs. 1,000 par value, a 12 percent coupon rate, and semiannual interest payments. If actual price of the bond in the market is Rs 900, compute yield to maturity, current … 
Finance
Which of the following statements about the relationship between yield to maturity and bond prices is FALSE? 
FINANCE
10. Bond prices and interest rate An 8 percent coupon bond with 15 years to maturity is priced to offer a 9 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.5 percent. What is the change in price … 
Finance
A firm's bond's have a maturity of 10 years with a $1,000 face value, an 8 percent semiannual coupon, are callable in 5 years at $1,050, and currently sell at a price of $1,100. What are their yield to maturity and their yield to call? 
finance
A 7.10 percent coupon bond with 14 years left to maturity is priced to offer a 7.8 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.4 percent. What is the change in price the bond will experience …