One-year Treasury securities yield 4.15%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 4.4%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities

The yield today for 2-year Treasury securities is 4.27%

Explanation:

In order to calculate the yield today for 2-year Treasury securities we would have to calculate the following formula:

2-year treasury yield = [ (1 + 1-yr treasury yield) * (1 + 1-yr treasury yield, 1 year from now) ]1/2 - 1

= [ (1 + 0.0415) * (1 + 0.044) ]∧1/2 - 1

= [1.0873]∧0.5 - 1

= 1.0427 - 1 = 0.0427, or 4.27%

The yield today for 2-year Treasury securities is 4.27%