Answer:
2 year yield 4 years from now 37.99%
Explanation:
given data
Interest rates r1 = 6.05% = 0.0605
Interest rates r2 = 7.6% = 0.0760
to find out
2 year yielding 4 years from now
solution
we find here 2 year securities will be yielding 4 years from now by as
2 year yield 4 years from now = [tex]\frac{(1+r2)^{t2}}{[(1+r1)^{t1}]^{0.5}}[/tex] - 1
put here value we get
2 year yield 4 years from now = [tex]\frac{(1+0.0760)^6}{[(1+0.0605)^4]^{0.5}}[/tex] - 1
2 year yield 4 years from now = 1.379915 - 1
2 year yield 4 years from now = .379915
so 2 year yield 4 years from now 37.99%
