Suppose We Observe the Three-Year Treasury Security Rate (₁R₃) to Be

question 68

Multiple Choice

Suppose we observe the three-year Treasury security rate (₁R₃) to be 11%, the expected one-year rate next year E(₂r₁) to be 4%, and the expected one-year rate the following year E(₃r₁) to be 5%. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate, ₁R₁?

• A) 18.57%
• B) 10.19%
• C) 23.19%
• D) 25.24%

---

Definitions:

Social Empathy

The ability to understand and share the feelings or attitudes of others within a social context.

Emotional Intelligence

The ability to recognize, understand, manage, and use one’s own emotions and those of others in positive ways.

Cross-Cultural

Pertaining to or considering the differences and similarities between cultures, often in the context of international relations, business, or communication.

Compromising Style

A conflict resolution approach where involved parties make concessions to reach a mutually acceptable solution, balancing assertiveness and cooperation.