Latest yield data available for Canadian Yields are as follows. Each rown represents a zero-coupon bond. The columns represent maturity in years.
Date
1 yr
2 yr
3 yr
4 yr
5 yr
10 yr
15 yr
20 yr
25 yr
30 yr
16-04-2015
0.64%
0.54%
0.58%
0.68%
0.80%
1.42%
1.89%
2.12%
2.16%
2.12%
17-04-2015
0.66%
0.59%
0.63%
0.72%
0.84%
1.46%
1.90%
2.12%
2.15%
2.12%
20-04-2015
0.68%
0.61%
0.65%
0.75%
0.87%
1.47%
1.92%
2.13%
2.17%
2.13%
21-04-2015
0.70%
0.61%
0.65%
0.76%
0.89%
1.50%
1.94%
2.14%
2.18%
2.14%
22-04-2015
0.69%
0.63%
0.69%
0.80%
0.94%
1.55%
1.98%
2.19%
2.22%
2.18%
23-04-2015
0.69%
0.62%
0.67%
0.78%
0.91%
1.54%
1.97%
2.17%
2.21%
2.17%
24-04-2015
0.71%
0.59%
0.64%
0.74%
0.87%
1.49%
1.93%
2.14%
2.18%
2.14%
27-04-2015
0.69%
0.61%
0.65%
0.75%
0.88%
1.51%
1.95%
2.16%
2.20%
2.16%
28-04-2015
0.69%
0.64%
0.70%
0.82%
0.96%
1.61%
2.04%
2.25%
2.29%
2.25%
29-04-2015
0.70%
0.64%
0.71%
0.83%
0.98%
1.65%
2.08%
2.28%
2.32%
2.28%
30-04-2015
0.72%
0.65%
0.71%
0.84%
0.98%
1.66%
2.08%
2.27%
2.31%
2.27%
1-Use the expectations hypothesis to calculate and predict interest rates as follows:
a-If the one-year interest rate is expected to be the same as the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now?
b-What interest rate is expected on a three-year bond one year from now?
c-What relationship do you find between interest rates and maturity?
d-If investors attach term premiums of 0.0025, 0.0075 and 0.0085 to the one-, two- and three- year bonds:
i-What would be the interest rate on a two-year security?
ii-What would be the interest rate on a three-year security?
iii-What is the forward rate for one-year Canada bonds one year from now?
iv-What is the adjusted forward rate for one-year Canada bonds one year out?
2-After describing the current yield curve and forecasting interest rates using both the expectations and preferred habitat and liquidity premium methods above,
a-What is your recommended minimum interest rate for the five-year fixed rate loans?
b-How would this rate be adjusted for customers that have some credit risk?
Latest yield data available for Canadian Yields are as follows. Each rown represents a zero-coupon bond. The columns represent maturity in years.
| Date | 1 yr | 2 yr | 3 yr | 4 yr | 5 yr | 10 yr | 15 yr | 20 yr | 25 yr | 30 yr | |||||||||
| 16-04-2015 | 0.64% | 0.54% | 0.58% | 0.68% | 0.80% | 1.42% | 1.89% | 2.12% | 2.16% | 2.12% | |||||||||
| 17-04-2015 | 0.66% | 0.59% | 0.63% | 0.72% | 0.84% | 1.46% | 1.90% | 2.12% | 2.15% | 2.12% | |||||||||
| 20-04-2015 | 0.68% | 0.61% | 0.65% | 0.75% | 0.87% | 1.47% | 1.92% | 2.13% | 2.17% | 2.13% | |||||||||
| 21-04-2015 | 0.70% | 0.61% | 0.65% | 0.76% | 0.89% | 1.50% | 1.94% | 2.14% | 2.18% | 2.14% | |||||||||
| 22-04-2015 | 0.69% | 0.63% | 0.69% | 0.80% | 0.94% | 1.55% | 1.98% | 2.19% | 2.22% | 2.18% | |||||||||
| 23-04-2015 | 0.69% | 0.62% | 0.67% | 0.78% | 0.91% | 1.54% | 1.97% | 2.17% | 2.21% | 2.17% | |||||||||
| 24-04-2015 | 0.71% | 0.59% | 0.64% | 0.74% | 0.87% | 1.49% | 1.93% | 2.14% | 2.18% | 2.14% | |||||||||
| 27-04-2015 | 0.69% | 0.61% | 0.65% | 0.75% | 0.88% | 1.51% | 1.95% | 2.16% | 2.20% | 2.16% | |||||||||
| 28-04-2015 | 0.69% | 0.64% | 0.70% | 0.82% | 0.96% | 1.61% | 2.04% | 2.25% | 2.29% | 2.25% | |||||||||
| 29-04-2015 | 0.70% | 0.64% | 0.71% | 0.83% | 0.98% | 1.65% | 2.08% | 2.28% | 2.32% | 2.28% | |||||||||
| 30-04-2015 | 0.72% | 0.65% | 0.71% | 0.84% | 0.98% | 1.66% | 2.08% | 2.27% | 2.31% | 2.27% |
1-Use the expectations hypothesis to calculate and predict interest rates as follows:
a-If the one-year interest rate is expected to be the same as the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now?
b-What interest rate is expected on a three-year bond one year from now?
c-What relationship do you find between interest rates and maturity?
d-If investors attach term premiums of 0.0025, 0.0075 and 0.0085 to the one-, two- and three- year bonds:
i-What would be the interest rate on a two-year security?
ii-What would be the interest rate on a three-year security?
iii-What is the forward rate for one-year Canada bonds one year from now?
iv-What is the adjusted forward rate for one-year Canada bonds one year out?
2-After describing the current yield curve and forecasting interest rates using both the expectations and preferred habitat and liquidity premium methods above,
a-What is your recommended minimum interest rate for the five-year fixed rate loans?
b-How would this rate be adjusted for customers that have some credit risk?
