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, respec- tively) are as follows: R = 6% E(2) = 7% E(31) = 7.5% E(41) = 7.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Plot the resulting yield curve.

LO.1