1) 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 = 0.5%, E(₂r ₁) = 1.5%, E(₃r₁) = 8.6%, E(₄r₁) = 8.95% Using the unbiased expectations theory, calculate the current (long-term) rate for four-year-maturity Treasury securities.

Do not round intermediate calculations. Round your percentage answers to 2 decimal places. Do NOT enter the percentage (%) sign (e.g., if your result is 1.23%, enter 1.23).

2)

Suppose we observe the following rates: ₁R₁ = 6.3%, ₁R₂ = 7.0%. 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(₂r₁)?

Do not round intermediate calculations. Round your percentage answers to 2 decimal places. Do NOT enter the percentage (%) sign (e.g., if your result is 1.23%, enter 1.23).