The Wall Street Journal Reports That the Rate on Four-Year

question 22

Multiple Choice

The Wall Street Journal reports that the rate on four-year Treasury securities is 7.50 percent and the rate on five-year Treasury securities is 9.15 percent. According to the unbiased expectations hypothesis, what does the market expect the one-year Treasury rate to be four years from today, E(₅r₁) ?

• A) 16.0 percent
• B) 18.4 percent
• C) 15.9 percent
• D) 13.7 percent

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