Suppose That the Current One-Year Rate (One-Year Spot Rate) and Expected

question 107

Multiple Choice

Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:
₁R₁ = 5 percent,
E(₂r₁) = 7 percent,
E(₃r₁) = 7.5 percent
E(₄r₁) = 7.85 percent
Using the unbiased expectations theory, calculate the current (long-term) rates for one-year and two-year-maturity Treasury securities.

• A) one-year: 5.00 percent,two-year: 5.50 percent
• B) one-year: 5.00 percent, two-year: 6.00 percent
• C) one-year: 5.50 percent, two-year: 6.15 percent
• D) one-year: 5.50 percent, two-year: 5.75 percent

Recognize the importance of controlling for extraneous variables in research studies.

Identify and describe measures of central tendency and variability.

Identify the steps involved in conducting scientific psychological research.

Understand the importance of empirical evidence in psychological research.

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