Interest rates The Wall Street Journal reports that the current rate on 5-year Treasury bonds is 6.50 percent and on 10-year Treasury bonds is 6.75 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a 5-year Treasury bond purchased five years from today, E(5r1) .
A) 6.625%
B) 6.75%
C) 7.00%
D) 7.58%
Correct Answer:
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