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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 (.e.. years 2, 3, and 4, respectively) are as follows: 181 = 4%, E (21) = 5 %, E(31) = 5.50 %, E ( 41 ) = 5.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.) Years 1 2 3 4 Current (Long-term) Rates

Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (.e.. years 2, 3, and 4, respectively) are as follows: 181 = 4%, E (21) = 5 %, E(31) = 5.50 %, E ( 41 ) = 5.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.) Years 1 2 3 4 Current (Long-term) Rates

Essentials Of Investments
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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Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (ie.. years 2, 3, and 4, respectively) are as follows: 181 = 4%, E(201) = 5%, E(31) = 5.50 %, E(41) = 5.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.) Years AGN- Current (Long-term) Rates
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 (ie.. years 2, 3, and 4, respectively) are as follows: 181 = 4%, E(201) = 5%, E(31) = 5.50 %, E(41) = 5.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.) Years AGN- Current (Long-term) Rates
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