The Wall Street Journal reports that the rate on 9-year Treasury securities is 1

Question

The Wall Street Journal reports that the rate on 9-year Treasury securities is 1.30 percent and the rate on 10-year Treasury securities is 1.85 percent. According to the unbiased expectations theories, what does the market expect the 1-year Treasury rate to be nine years from today, E(10r1)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) The Wall Street Journal reports that the rate on 9-year Treasury securities is 1.30 percent and the rate on 10-year Treasury securities is 1.85 percent. According to the unbiased expectations theories, what does the market expect the 1-year Treasury rate to be nine years from today, E(10r1)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) The Wall Street Journal reports that the rate on 9-year Treasury securities is 1.30 percent and the rate on 10-year Treasury securities is 1.85 percent. According to the unbiased expectations theories, what does the market expect the 1-year Treasury rate to be nine years from today, E(10r1)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Explanation / Answer

10-year rate = 1.85%

9-year rate = 1.3%

Let 1 year rate after 9 years will be r

(1 + r) * (1 + 1.3%)9 = (1 + 1.85%)10

(1 + r) = 1.069363

r = 6.94%

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