Suppose that the interest rate on a one-year Treasury bill is currently 1% and that investors expect

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Suppose that the interest rate on a one-year Treasury bill is currently 1% and that investors expect that the interest rates on one-year Treasury bills over the next three years will be 2%, 3%, and 2%. Use the expectations theory to calculate the current interest rates on two-year, three-year, and four-year Treasury notes.

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Money, Banking, and the Financial System

ISBN: 978-0134524061

3rd edition

Authors: R. Glenn Hubbard, Anthony Patrick O'Brien

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