Unbiased Expectations Theory The Wall Street Journal reports that the rate on 3-year Treasury securities is 6.25 percent and the rate on 5-year Treasury securities is 6.45 percent. According to the unbiased expectations hypotheses, what does the market expect the 2-year Treasury rate to be three years from today, E(4r2) ?
A) 6.35%
B) 6.75%
C) 7.25%
D) 7.45%
Correct Answer:
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