Macroeconomics 5th Edition by Olivier Blanchard

Exercise 2

Suppose that the annual interest rate this year is 5%, and financial market participants expect the annual interest rate to increase to 5.5% next year, to 6% two years from now, and to 6.5% three years from now. Determine the yield to maturity on each of the following bonds.
a. A one-year bond.
b. A two-year bond.
c. A three-year bond.