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FinanceQ&A LibraryThe following are the current coupon yields to maturity and spot rates of interest for six U.S. Treasury securities. Assume that all securities pay interest annually. Yields to Maturity and Spot Rates of Interest Term to Maturity (yrs) Current Coupon Yield to Maturity (%) Spot Rate of Interest (%) 1-yr Treasury 5.25% 5.25% 2-yr Treasury 5.75% 5.79% 3-yr Treasury 6.15% 6.19% 5-yr Treasury 6.45% 6.51% 10-yr Treasury 6.95% 7.10% 30-yr Treasury 7.25% 7.67% Compute the 2-year implied forward rate three years from now, given the information provided in the preceding table. State the assumption underlying the calculation of the implied forward rate.Question

The following are the current coupon yields to maturity and spot rates of interest for six U.S. Treasury securities. Assume that all securities pay interest annually. |

Yields to Maturity and Spot Rates of Interest | ||

Term to Maturity (yrs) | Current Coupon Yield to Maturity (%) | Spot Rate of Interest (%) |

1-yr Treasury | 5.25% | 5.25% |

2-yr Treasury | 5.75% | 5.79% |

3-yr Treasury | 6.15% | 6.19% |

5-yr Treasury | 6.45% | 6.51% |

10-yr Treasury | 6.95% | 7.10% |

30-yr Treasury | 7.25% | 7.67% |

Compute the 2-year implied forward rate three years from now, given the information provided in the preceding table. State the assumption underlying the calculation of the implied forward rate. |

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