The current rates on Treasury securities are as follows: 1R1 = 4.33%, 1R2 = 5.25%, 1R3...

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The current rates on Treasury securities are as follows: 1R1 = 4.33%, 1R2 = 5.25%, 1R3...

The current rates on Treasury securities are as follows: ₁R₁ = 4.33%, ₁R₂ = 5.25%, ₁R₃ = 5.55%, and ₁R₄ = 6.01%. If the unbiased expectations theory holds, If you held a 4-year Treasury until maturity, what is the total return you will earn over the 4 year period?

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Answer 1

Answer #1

Total return = (1 + .0433) * ( 1 + .0525) * (1+ .0555) * (1 + .0601) - 1

= .2287

= 22.87%

total return you will earn over the 4 year period = 22.87%

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Answer 2

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The current rates on Treasury securities are as follows: 1R1 = 4.33%, 1R2 = 5.25%, 1R3...

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