You find that the yield on a 4-year bond is 9% while the yield on a 2-year bond beginning four years from now is 10%.What should be the yield on a 6-yr bond as predicted by the expectations' theory?

Name: You find that the yield on a 4-year bond is 9% while the yield on a 2-year bond beginning four years from now is 10%.What should be the yield on a 6-yr bond as predicted by the expectations' theory?
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Quizplus · Accepted Answer

(1 + r)⁶ = (1.09)⁴ ´ (1.1)²====> (1 + r)⁶ = (1.7080137)⁶ =====> r = .0933

You Find That the Yield on a 4-Year Bond Is