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Suppose we observe the 3-year Treasury security rate (R31) to be 7 percent, the expected 1-year rate next year E(r12) to be 4 percent, and
Suppose we observe the 3-year Treasury security rate (R31) to be 7 percent, the expected 1-year rate next year E(r12) to be 4 percent, and the expected 1-year rate the following year E(r13) to be 5 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year Treasury security rate, R11
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