Suppose we observe the three-year Treasury security rate ( 1R3 ) to be 12 percent, the expected
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Suppose we observe the three-year Treasury security rate ( 1R3 ) to be 12 percent, the expected one-year rate next year— E ( 2r1 )—to be 8 percent, and the expected one-year rate the following year— E ( 3r1 )—to be 10 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? ( LG 2-7 )
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Financial Markets And Institutions
ISBN: 9780078034664
5th Edition
Authors: Anthony Saunders, Marcia Cornett
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