11Unbiased 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 follows1R₁ = 4.85%, E(271) = 5.85%, E(371) = 6.35%, E(471) = 6.70%Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?Multiple Choice5.9352%5.9375%1.6340%Saved6.7000%HelpSave & ExitSubmit

R1 = 4.85%/100 = 0.0485 in decimalsE(2r1) = 5.85%/100 = 0.0585 in decimalsE(3r1) = 6.35%/100 =…

Multiple Choice (i.e., years 2, 3, and 4, respectively) are as follows = 4.85%, E(271) = 5.85%, E(371) = 6.35%, E(471) = 6.70% the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities? 5.9352% (one-year spot rate) and expected one-year T-

Multiple Choice (i.e., years 2, 3, and 4, respectively) are as follows = 4.85%, E(271) = 5.85%, E(371) = 6.35%, E(471) = 6.70% the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities? 5.9352% (one-year spot rate) and expected one-year T-

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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Concept explainers

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.

Question

11
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 = 4.85%, E(271) = 5.85%, E(371) = 6.35%, E(471) = 6.70%
Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?
Multiple Choice
5.9352%
5.9375%
1.6340%
Saved
6.7000%
Help
Save & Exit
Submit

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