Question: Assume the current interest rate on a one - year Treasury bond ( R 1 1 ) ( R 1 1 ) is 5 .

Assume the current interest rate on a one-year Treasury bond (R11)(R11) is 5.50 percent, the current rate on a two-year Treasury bond (R21)(R21) is 5.95 percent, and the current rate on a three-year Treasury bond (R31)(R31) is 8.50 percent. If the unbiased expectations theory of the term structure of interest rates is correct, what is the one-year interest rate expected on Treasury bills during year 3, f13f13?

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