Wednesday, July 13, 2011

What is the expected one-year rate in year four for a Government Bond with a GRY of 6.5%?(y1 3%, y2 4%, y3 7%)?

If one-year government interest rates over the next three years are expected to be 3%, 4%, 7%, and a four-year government bond has a GRY of 6.5%, what is the expected one-year rate in year four?

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