Question

One-year treasury bills currently earn 3.75 percent. You expect that one year from now, one-year treasury bill rates will increase to 4.15 percent. If the unbiased expectations theory is correct, what should the current rate be on two-year treasury securities?

Answer 1

Answer:

the rate that a security would pay if no inflation were expected over its holding ... U.S. Treasury bonds = 4.15 percent ... Unbiased Expectations Theory One-year Treasury bills currently earn 3.15 percent

Answer 2

Explanation:

Unbiased Expectations Theory One-year Treasury bills currently earn 3.15 percent. You expected that one year from now, 1-year Treasury bill rateswill increase to 3.65 percent and that two years from now, one-year Treasury bill rates will increase to 4.05 percent