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

question 36

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 percent, ₁R₂ = 4.75 percent, ₁R₃ = 5.25 percent, ₁R₄ = 5.95 percent
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 percent; Year 2: 6.26 percent; Year 3: 8.08 percent
• B)Year 1: 3.75 percent; Year 2: 6.02 percent; Year 3: 9.00 percent
• C)Year 1: 4.95 percent; Year 2: 7.26 percent; Year 3: 8.08 percent
• D)Year 1: 3.65 percent; Year 2: 6.32 percent; Year 3: 11.08 percent

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