Assume that the current one-year rate (one-year spot rate) and the expected rates on one-year T-bills over the next three years (that is, years 2, 3, and 4, respectively) are as follows :

1 R 1 = 0.4%, E ( 2 r 1 ) = 1.4%, E ( 3 r 1 ) = 10.6%, E ( 4 r 1 ) = 10.95% Using expectation theory Unbiased, find the current (long-term) rates for Treasury securities maturing in one, two, three, and four years.

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According to the Expectation Theory Unbiased the longterm rate for security maturing in n years is e... View the full answer