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Calculate the current rates for one

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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:

R 1 1= 6% , Er 1 2= 7% , Er 1 3= 7.5% , Er 1 4= 7.85%

Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year maturity Treasury securities. Plot the resulting yield curve. ( LG 2-7 )

Reference no: EM132632584

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