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(41) = 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)) One-year Two-year Three-year Four-year Current (Long-Term) Rates 0.400 % 0.009 % 0.034 % 0.048 %
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(41) = 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)) One-year Two-year Three-year Four-year Current (Long-Term) Rates 0.400 % 0.009 % 0.034 % 0.048 %
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(3²1) = 8.6%, E(4²1) = 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))
One-year
Two-year
Three-year
Four-year
Current (Long-Term)
Rates
0.400 %
0.009 %
0.034 %
0.048 %
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