Question

*The Wall Street Journal* reports that the current rate on 10-year Treasury bonds is 2.85 percent and the rate on 20-year Treasury bonds is 5.10 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a 10-year Treasury bond purchased ten years from today, *E*(_{10}*r*_{10}). **(Do not round intermediate calculations. Round your answer to 2 decimal places.)**

**Expected rate ____.__%**

Step 1

**Calculation of Expected Rate:**

The expected rate of 10-year Treasury Bond is **7.40%**.

**Excel Spreadsheet:**

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