Suppose the current one-year spot rate and expected one-year T-bill rates over the following three years (ie. years 2, 3, and 4, respectively) are as follows: 1R₁=5.25%, Elar) = 4.80%, Eri) = 4.25% percent, and three-year spot rate is Using the unbiased expectations theory, two-year spot rate is percent. (Do not round intermediate calculations but round your final answer to 2 decimal places)

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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”.