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11. Suppose we observe the three-year Treasury security rate (R3) to be 12 percent, the expected one-year rate next year- Eg) to be 8 percent, and the expected one-year rate the following yearE)-to be 10 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? (LG 2-7) 19.
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Solution Expeanaltoys theer held a forecast for a short eod n olven wonds, the Long-term inteyet vates toreast a short-tem whe veh erm mterey Given infatmdtion: The thee-yea7tseasury Secunity safe防12% The expected one-yon ode Dz 8 % and the expedta one yean yate folluing ip loy. The toia Polloeg Expectotion whereCom pude, the one year daking Cube both Siules C112

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