Suppose we observe the 3-year Treasury security rate (1R3) to be 6 percent, the expected 1-year...
Suppose we observe the 3-year Treasury security rate (1R3) to be 6 percent, the expected 1-year rate next year—E(2r1)—to be 4 percent, and the expected 1-year rate the following year—E(3r1)—to be 5 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year Treasury security rate, 1R1? (Round your answer to 2 decimal places.)
Homework Answers
Unbiased expectations states that
(1+1R1)((1+2R1)*(1+3R1)=(1+1R3)^3
=>1R1=1.06^3/(1.04*1.05)-1
=>1R1=9.0674%
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Suppose we observe the 3-year Treasury security rate
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11. Suppose we observe the three-year Treasury security rate (R3) to be 12 percent, the expected...
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Suppose we observe the following rates: 1R1 = 5.1%, 1R2 = 7.3%. If the unbiased expectations...
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Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill...
Unbiased Expectations Theory 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=6.95%, E(2r1) =7.45%, E(3r1) =8.45% E(4r1)=8.95% Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the...
Suppose that the current 1-year rate (1-year spot
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Using the unbiased expectations theory, calculate the current
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Round your answers to 2 decimal
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1 _____.__%
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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
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E(2r1) = 4.60%,
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Using the unbiased expectations theory, calculate the current
(long-term) rates for one-, two-, three-, and four-year-maturity
Treasury securities. (Do not round intermediate calculations.
Round your answers to 2 decimal
places.)
Year Current (Long-Term) Rates
1 _____.__%
2 _____.__%
3...
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