Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 7%, E(2r1) = 8%, E3) = 8.60%, E(4r 1) = 8.95% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Note: Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Years Current (Long-term) Rates 1 % 2 3 % % %
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 7%, E(2r1) = 8%, E3) = 8.60%, E(4r 1) = 8.95% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Note: Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Years Current (Long-term) Rates 1 % 2 3 % % %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3,
and 4, respectively) are as follows:
1R1 7%, E(21) =8%, E3) = 8.60 %, E(4r 1) = 8.95%
Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury
securities.
Note: Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).
Years
Current (Long-term)
Rates
1
%
2
%
3
%
4
%
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