Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates

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Unbiased Expectations TheorySuppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:

₁R₁=6.80%,E(₂r₁) =7.30%,E(₃r₁) =8.30%E(₄r₁)=8.80%

Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?

Posted Date: May 19, 2024 10:16 PM

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Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates

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