The yield on a one-year bond is currently 4% and the expected yield on one-year bonds for the next two years is 5% and 6%. If the liquidity premium is 0.5%, what is the yield on a bond with two years to maturity?
If the government budget deficit rises, explain the impact on the risk premia of corporate bonds.
As the supply of government (risk-free) bonds increases, the yields on those bonds rise, reducing the risk premia for corporate bonds.
The yield on a one-year bond is currently 6% and the expected yield on one-year bonds for the next three years is 4%, 2% and 1%. If the liquidity premium is 1%, what are the yields on a bond with two, three and four years to maturity?
The yield on a one-year bond is currently 5% and the liquidity premium is 0.5( is the years to maturity. You are told that the spread between two- and one-year bonds is positive. What does that tell you about the yield on the two-year bond?
The current and expected future yields on the one year Treasury bond is 7%. The liquidity premium is 0.5( is the number years to maturity on the bond. Sketch the yield curve covering the next four years. Briefly explain your work.