You observe the following yield curve for Treasury securitie…

You observe the following yield curve for Treasury securities: Maturity             Yield 1 Year                1.00% 2 Years              2.00% 3 Years              2.60% 4 Years              3.00% 5 Years              4.70% Assume that the pure expectations hypothesis holds.  What does the market expect will be  the yield on 4-year securities, 1 year from today?

The Howe family recently bought a house.  The house has a 15…

The Howe family recently bought a house.  The house has a 15-year,  $249,865.00 mortgage with monthly payments and a nominal interest rate of 3.8 percent.  What is the total dollar amount of principal the family will pay  during the first 4 years of their mortgage?  (Assume that all  payments are made at the end of the month.)

One-year Treasury securities yield 2.3 percent, 2-year Treas…

One-year Treasury securities yield 2.3 percent, 2-year Treasury securities yield 1.5 percent, and 3-year Treasury securities yield 2.6 percent. Assume that the expectations theory holds.  What does the market expect will be the yield on 1-year Treasury securities two years from now?

The real risk-free rate of interest is 1 percent.  Inflation…

The real risk-free rate of interest is 1 percent.  Inflation is expected to be 5 percent this  coming year, jump to 7 percent next year, and increase to 8 percent the year after (Year 3).   According to the expectations theory, what should be the interest rate on 3-year, risk-free  securities today?