Using the unbiased expectations theory

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Reference no: EM131608842

Unbiased Expectations Theory (LG6-5) Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 1%, E(2r1) = 3.95%, E(3r1) = 4.45%, E(4r1) = 5.95% Using the unbiased expectations theory, calculate the current (longterm) rates for 1-, 2-, 3-, and 4-year-maturity Treasury securities. Plot the resulting yield curve. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-term) Rates 1 % 2 % 3 % 4 %

Reference no: EM131608842

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