(Answered) Suppose that the current one-year rate one-year spot rate

Economics

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 = 6% E (2r1) = 7% E (3r1) = 7.5% E ( 4r1)= 7.85%

Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Plot the resulting yield curve.

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Category:- Macroeconomics
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