Suppose that the current three$-$year rate $($three$-$year spot rate$)$ and expected one$-$

year $T-$bill rates over the following years are as follows:

$1R_3=12\%$

$E{(}_2{r}_1)=8\%$

$E{(}_3{r}_1)=10\%$

Using the unbiased expectations theory, calculate the current rates for one$-$ and

two$-$year maturity Treasury securities$,$ i$.$e$.,1R_1$ and $1R_2.$ Convert your answers to

percentages.

$1R1=17\mathrm{.}39\%$;$1R2=12\mathrm{.}56\%$

$1R1=20\mathrm{.}73$;$1R2=11\mathrm{.}49\%$

$1R1=18\mathrm{.}26\%$;$1R2=13\mathrm{.}01\%$

$1R1=19\mathrm{.}52$;$1R2=14\mathrm{.}74\%$