A particular security’s equilibrium rate of return is 9 percent.

For all
eql 9% 9%
inf 3.80% 3.05%
rf 2.80% 2.90%
tax 0.35% 0.55%
mrprm 0.75% 0.75%
df

6.200% 6.100%
2.400% 3.050%
1.300% 1.750%

The current one-year Treasury bill rate is 0.50 percent and the expected one-year
rf 0.50% 0.49%
month 12 12
1% 1%
2 year 2 2

0.94% 0.74%

0.38% 0.42% One-year Treasury bills currently earn 0.38 percent. You ex
0.42% 0.47%
2 2
0.40% 0.44%

5.80% 5.80% Suppose we observe the three-year Treasury security rate (1R3) to be 5.8 percen
6.10% 6.10%
6.70% 6.70%

4.61% 4.61%
n is 9 percent. For all securities, the inflation risk premium is 3.05 percent and the real risk-free rate

t and the expected one-year rate 12 months from now is 1.38 percent. According to the unbiased expectations theory, what should be th

0.38 percent. You expect that one year from now, one-year Treasury bills rates will increase to 0.42

y rate (1R3) to be 5.8 percent, the expected one-year rate next year—E(2r1)—to be 6.1 percent, and the expected one-year rate the follow
the real risk-free rate is 2.9 percent. The security’s liquidity risk premium is 0.55 percent and maturit

ons theory, what should be the current rate for a two-year Treasury security?

es will increase to 0.42 percent. If the unbiased expectations theory is correct, what should the curre

ected one-year rate the following year—E(3r1)—to be 6.7 percent. If the unbiased expectations theory of the term structure of interest rates
5 percent and maturity risk premium is 0.75 percent. The security has no special covenants. Calcula

what should the current rate be on two-year Treasury securities?

term structure of interest rates holds, what is the one-year Treasury security rate?
ial covenants. Calculate the security’s default risk premium