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Suppose we observe the 3-year Treasury security rate ( 1 R 3 ) to be 9 percent, the expected 1-year rate next year E (

Suppose we observe the 3-year Treasury security rate (1R3) to be 9 percent, the expected 1-year rate next yearE(2r1)to be 4 percent, and the expected 1-year rate the following yearE(3r1)to be 6 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year Treasury security rate, 1R1? (Round your answer to 2 decimal places.) image text in transcribed

Problem 6-25 Unbiased Expectations Theory (LG6-7) Suppose we observe the 3-year Treasury security rate (1R3) to be 9 percent, the expected 1-year rate next year-E(281)to be 4 percent, and the expected 1-year rate the following year-E(3ri)to be 6 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year Treasury security rate, 1R1? (Round your answer to 2 decimal places.) Treasury security rate %

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