The examples in my text book only show me how to solve when you have a 2 year investment not 5. I'm not sure how to solve this. I know the answer is 3.625% but I am unsure how to get there.
I tried this but it did not help:
(1+.03)(1+E(r)=(1+.035)^5
The US Govt. currently has a 1 year T-bill with a yield to maturity of 3%. It also has 5 year notes with a yield to maturity of 3.5%. Based on the expectation hypothesis, what is the expected yield govt. issued bills have between years 1 to 5?
Please help
I tried this but it did not help:
(1+.03)(1+E(r)=(1+.035)^5
The US Govt. currently has a 1 year T-bill with a yield to maturity of 3%. It also has 5 year notes with a yield to maturity of 3.5%. Based on the expectation hypothesis, what is the expected yield govt. issued bills have between years 1 to 5?
Please help