ECO 303 AS 6B (Ch.

4) Due: 10/24/17 (T) 8:00am CST* Name_______________

*Nothing accepted after 8:59am

Answers must be submitted through BB. This will require that you scan your work and then upload it
into BB as a pdf file. I will not accept them in any other fashion (no jpeg, photos, etc).
Do the following problem @ 28 points. Show all work for full credit.
Given the following data on debt U.S. Treasury debt instruments:
 1-year note yield = 4.42% 7-year note yield = 5.64%
 2-year note yield = 4.69% 8-year note yield = 5.70%
 3-year note yield = 5.02% 9-year note yield = 5.86%
 4-year note yield = 5.02% 10-year note yield = 5.95%
 5-year note yield = 5.35% 11-year note yield = 5.90%
 6-year note yield = 5.50% 12-year note yield = 5.99%
And constant premiums of 0, .17%, .41%, .63%, .82%, .98%, 1.12%, 1.22%, 1.30%, 1.37%, 1.42%, 1.45%, 1.47%
a. Calculate the expected market yields for a (5,1,2) path.
b. Calculate the expectations yields for a (1,6,1) path.
c. Calculate the real world yield for a (3,3,2) path.
d. Calculate the expected preferred habitat yield for a 4-year note purchased at the beginning of year 5.
e. Calculate the expectations yield on a 5-year note purchased at the beginning of year 3.
f. Determine the expectations yield on a 10-year note purchased today.
g. Determine the yield on a 12-year Treasury note purchased today.
h. Describe the yield curve and provide a general interpretation of what implies about the economy.