The Wall Street Journal Reports That the Current Rate on Five-Year

question 13

Multiple Choice

The Wall Street Journal reports that the current rate on five-year Treasury bonds is 6.45 percent and on 10-year Treasury bonds is 7.75 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a five-year Treasury bond purchased five years from today, E(₅r₅) .

• A) 7.25 percent
• B) 8.12 percent
• C) 9.07 percent
• D) 10.16 percent

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