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Suppose we observe the three-year Treasury security rate to be 12%, the expected one-year rate next year E( 2 r 1 ) to be 8%
Suppose we observe the three-year Treasury security rate to be 12%, the expected one-year rate next year E(2r1) to be 8% and the expected one-year rate the following year E(3r1) to be 9%. Using the unbiased expectations theory, what is the one-year Treasury security rate? Steps Please
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