On May 23, 20XX, the Existing or Current (Spot) One-Year

question 71

Multiple Choice

On May 23, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows: ₁R₁ = 4.55%, ₁R₂ = 4.75%, ₁R₃ = 5.25%, ₁R₄ = 5.95%
Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years two, three, and four as of May 23, 20XX.

• A) Year 1: 4.95%; Year 2: 6.26%; Year 3: 8.08%
• B) Year 1: 3.75%; Year 2: 6.02%; Year 3: 9.00%
• C) Year 1: 4.95%; Year 2: 7.26%; Year 3: 8.08%
• D) Year 1: 3.65%; Year 2: 6.32%; Year 3: 11.08%

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