Check my work 4 Suppose we observe the three-year Treasury security rate (1 R3)
ID: 2819896 • Letter: C
Question
Check my work 4 Suppose we observe the three-year Treasury security rate (1 R3) to be 4.5 percent, the expected one-year rate next year-El2)-to be 46 percent, and the expected one-year rate the following year-B3)-to be 4.7 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) nts One-year Treasury security 012739 elook ReferencesExplanation / Answer
Answer: 4.20%
Calculation:
One-year treasury security rate = 1.045^3/ (1.046*1.047)-1 = 4.20%
Answer: 4.20%
Calculation:
One-year treasury security rate = 1.045^3/ (1.046*1.047)-1 = 4.20%