Question

Suppose we observe the three-year Treasury security rate
(_{1}*R*_{3}) to be 4.3 percent, the
expected one-year rate next
year—*E*(_{2}*r*_{1})—to be 4.8
percent, and the expected one-year rate the following
year—*E*(_{3}*r*_{1})—to be 5.6
percent. If the unbiased expectations theory of the term structure
of interest rates holds, what is the one-year Treasury security
rate? **(Do not round intermediate calculations. Round your
answer to 2 decimal places. (e.g., 32.16))**

one-year Treasury security rate: _______%

Answer #1

The three-year Treasury security rate (1*R*3) = 4.3%

The expected one-year rate next year *E*(2*r*1) =
4.8 %

The expected one-year rate in third year
*E*(3*r*1) = 5.6 %

We have to find the one-year Treasury security rate
(1*R*1)

Now according to the formula,

1*R*3 = [ ( 1 + 1*R*1)* (1 +
*E*(2*r*1)* (1 + *E*(3*r*1) ]
^(1/3)

or, 1.043 = [ ( 1 + 1*R*1) * 1.048 * 1.056] ^(1/3)

or, 1.043^3 = [ ( 1 + 1*R*1) * 1.048 * 1.056]

or, 1.1346 = [ ( 1 + 1*R*1) * 1.048 * 1.056]

or, ( 1 + 1*R*1) = 1.1346 / (1.048 *
1.056)

or, ( 1 + 1*R*1) = 1.025245

or, 1*R*1 = 0.025245 or 2.5245 % or **2.52 %
(answer)**

Question: Suppose that the current one-year rate (one-year spot
rate) and expected one-year T-bill rates over the following 3 years
(i.e., years 2, 3 and 4 respectively) are as follows:
1R1 = 0.4%, E(2r1) = 1.4%, E(3r1) = 8.8% E(4r1) = 9.15%
Using the unbiased expectations theory, calculate the current
(long-term) rates for three-year- and four-year-maturity Treasury
securities. Using the unbiased expectations theory, calculate the
long term rates for one, two, three, and four years maturity
Treasury securities. (Round answers...

Unbiased Expectations Theory Suppose 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=4.70%, E(2r1) =5.70%, E(3r1) =6.20%,
E(4r1)=6.55% Using the unbiased expectations theory, what is the
current (long-term) rate for four-year-maturity Treasury
securities?
Multiple Choice
6.5500%
5.7852%
5.7875%

Suppose we observe the following rates: 1R 1 = 12 percent, 1R 2
= 15 percent. If the unbiased expectations theory of the term
structure of interest rates holds, what is the one-year interest
rate expected one year from now, E( 2r 1)?

Suppose we observe the following rates: 1R 1 = 12 percent, 1R 2
= 15 percent. If the unbiased expectations theory of the term
structure of interest rates holds, what is the one-year interest
rate expected one year from now, E( 2r 1)?

Assume the current interest rate on a one-year Treasury bond
(1R1) is 4.50 percent, the current rate on a two-year Treasury bond
(1R2) is 5.25 percent, and the current rate on a three-year
Treasury bond (1R3) is 6.50 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
(E( 3r1) or 3 f1)?
please show how to do in excel

Suppose that the current 1-year rate (1-year spot rate) and
expected 1-year T-bill rates over the following three years (i.e.,
years 2, 3, and 4, respectively) are as follows:
1R1 = 6%,
E(2r1) = 7%,
E(3r1) = 7.60%,
E(4r1) = 7.95%
Using the unbiased expectations theory, calculate the current
(long-term) rates for 1-, 2-, 3-, and 4-year-maturity Treasury
securities. (Round your answers to 2 decimal
places.)

Suppose that the current 1-year rate (1-year spot rate) and
expected 1-year T-bill rates over the following three years (i.e.,
years 2, 3, and 4, respectively) are as follows: 1R1 = 1%, E(2r1) =
4.25%, E(3r1) = 4.75%, E(4r1) = 6.25% Using the unbiased
expectations theory, calculate the current (longterm) rates for 1-,
2-, 3-, and 4-year-maturity Treasury securities. Plot the resulting
yield curve. (Do not round intermediate calculations. Round your
answers to 2 decimal places.)

1- A particular security’s equilibrium rate of return is 8
percent. For all securities, the inflation risk premium is 3.35
percent and the real risk-free rate is 2.2 percent. The security’s
liquidity risk premium is 0.55 percent and maturity risk premium is
0.85 percent. The security has no special covenants. Calculate the
security’s default risk premium. (Round your answer to 2
decimal places. (e.g., 32.16))
Default risk premium %
2- Suppose we observe the following rates:
1R1 = 5.2%,
1R2...

A recent edition of The Wall Street Journal reported
interest rates of 2.65 percent, 3.00 percent, 3.38 percent, and
3.65 percent for three-year, four-year, five-year, and six-year
Treasury notes, respectively. According to the unbiased
expectations theory of the term structure of interest rates, what
are the expected one-year rates during years 4, 5, and 6?
(Do not round intermediate calculations. Round your answers
to 2 decimal places. (e.g., 32.16))

Unbiased Expectations Theory One-year Treasury bills currently
earn 5.30 percent. You expect that one year from now, one-year
Treasury bill rates will increase to 5.45 percent. If the unbiased
expectations theory is correct, what should the current rate be on
two-year Treasury securities?

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