Observing the Following Term Structure; a US Treasury Bond Maturing

question 14

Multiple Choice

Observing the following term structure; a US treasury bond maturing in 5 years has a yield of 6% while US Treasury bond maturing in 3 years has a yield of 4%; what is the expected 2 year rate,3 years from now?

• A) 10.00%
• B) 9.07%
• C) 8.86%
• D) 9.00%

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Definitions:

Magnetic

Pertaining to or exhibiting magnetism; having the ability to attract iron and certain other materials.

Igneous

Pertains to rocks or minerals that have solidified from molten or partially molten material, indicative of volcanic or magmatic origin.

Metamorphic

Rock that has undergone transformation through heat, pressure, or chemically active fluids, altering its original composition or structure.

Sedimentary

Relating to rocks formed by the accumulation and consolidation of mineral and organic particles deposited by water, air, or ice.