Given the following market data on U.S. Treasury instruments:
1-year note yield = 1.83% 5-year note yield = 2.79%
2-year note yield = 1.99% 6-year note yield = 3.04%
3-year note yield = 2.21% 7-year note yield = 3.58%
4-year note yield = 2.42% 8-year note yield = 4.18%
And non-changing premiums of 0, .07%, .22%, .39%, .52%, .64%, .75%, 88%, & .98%
Calculate the expected expectations yield for a (3,2,1,2) path.
Calculate the pure expectations yield for a (1,4,3,) path.
Calculate the expected empirical yields for a (2,5,1) path.
Calculate the expected expectations yield for a 5-year note purchased at the beginning of year 3.
Calculate the expected market yield on a 4-year note purchased at the beginning of year 2.
Determine the expectations yield on a 5-year note purchased today.
Describe the yield curve and provide a general interpretation of what implies about the economy.