Observing the following term structure; a US treasury bond maturing in 5 years has a yield of 6% while US Treasury bond maturing in 3 years has a yield of 8%; what is the expected 2 year rate,3 years from now?

Name: Observing the following term structure; a US treasury bond maturing in 5 years has a yield of 6% while US Treasury bond maturing in 3 years has a yield of 8%; what is the expected 2 year rate,3 years from now?
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Question

Quizplus · Accepted Answer

(1.06)^5=(1.08)^3 * (1+x)^2
x=3.07

Observing the Following Term Structure; a US Treasury Bond Maturing