Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over. the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.4%, E(2r 1) = 1.4%, E(3r1) = 8.6%, E(4r1) = 8.95% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your percentage answers to 3 decimal places. (e.g., 32.161)) Current (Long-Term) Rates One-year :% % Two-year % % Three-year Four-year
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over. the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.4%, E(2r 1) = 1.4%, E(3r1) = 8.6%, E(4r1) = 8.95% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your percentage answers to 3 decimal places. (e.g., 32.161)) Current (Long-Term) Rates One-year :% % Two-year % % Three-year Four-year
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 one-year rate (one-year spot rate) and expected one-year T-bill rates over. the following three years (i.e.,
years 2, 3, and 4, respectively) are as follows:
1R1 = 0.4%, E(2r 1) = 1.4%, E(3r1) = 8.6%, E(4r1) = 8.958
Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury
securities. (Round your percentage answers to 3 decimal places. (e.g., 32.161))
Current (Long-Term)
Rates
One-year
:%
Two-year
%
Three-year
%
Four-year
Expert Solution
Step 1
For One-year
The rate will be same as current one year rate or 1R1
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