Suppose we observe the three-year Treasury security rate (1R3) to be 4.9 percent, the expected one-year rate next year-E(2r1)-to be 5.4 percent, and the expected one-year rate the following year-E(3r1)-to be 6.4 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Suppose we observe the three-year Treasury security rate (1R3) to be 4.9 percent, the expected one-year rate next year-E(2r1)-to be 5.4 percent, and the expected one-year rate the following year-E(3r1)-to be 6.4 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Chapter22: International Financial Management
Section: Chapter Questions
Problem 2P
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