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: 181 9%, E(21) -10%, B3) 10.60%, E(41) = 10.95% 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 %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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 9%, E(21) = 10%, E31) = 10.60%, E(41) = 10.95%
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
%
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 9%, E(21) = 10%, E31) = 10.60%, E(41) = 10.95% 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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