The Wall Street Journal reports that the rate on three-year Treasury securities

Question

The Wall Street Journal reports that the rate on three-year Treasury securities is 7.20 percent and the rate on five-year Treasury securities is 8.56 percent.

According to the unbiased expectations hypothesis, what does the market expect the 2-year Treasury rate to be three years from today, E(3r2)? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

According to the unbiased expectations hypothesis, what does the market expect the 2-year Treasury rate to be three years from today, E(3r2)? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

sqrt((1.0856)^5/(1.072)^3) - 1 =10.63%

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