A recent edition ofÂ The Wall Street JournalÂ reported interest rates of 2.75 percent, 3.10 percent, 3.48 percent, and 3.75 percent for 3, 4, 5, and 6year Treasury security yields, respectively. According to the unbiased expectation theory of the term structure of interest rates, what are the expected 1year forward rates for years 4, 5, and 6?Â (Do not round intermediate calculations and round your answers to 2 decimal places.
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Oneyear Treasury bills currently earn 1.30 percent. You expect that one year from now, 1year Treasury bill rates will increase to 1.50 percent. If the unbiased expectations theory is correct, what should the current rate be on 2year Treasury securities?Â (Round your answer to 2 decimal places.)
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Suppose that the current 1year rate (1year spot rate) and expected 1year Tbill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 
_{Â Â Â Â Â Â Â Â Â Â Â Â Â 1}R_{1}Â = 9%, Â E(_{2}r_{1}) = 10%, E(_{3}r_{1}) = 10.6%, E(_{4}r_{1}) = 10.95% 
Using the unbiased expectations theory, calculate the current (longterm) rates for 1, 2, 3, and 4yearmaturity Treasury securities.Â
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Nikki Gâ€™s Corporationâ€™s 10year bonds are currently yielding a return of 6.15 percent. The expected inflation premium is 1.10 percent annually and the real interest rate is expected to be 2.30 percent annually over the next ten years. The liquidity risk premium on Nikki Gâ€™s bonds is 0.35 percent. The maturity risk premium is 0.20 percent on 3year securities and increases by 0.03 percent for each additional year to maturity. Calculate the default risk premium on Nikki Gâ€™s 10year bonds.Â (Round your answer to 2 decimal places.)
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Tom and Sueâ€™s Flowers, Inc.â€™s, 10year bonds are currently yielding a return of 9.00 percent. The expected inflation premium is 3.00 percent annually and the real interest rate is expected to be 3.45 percent annually over the next 10 years. The default risk premium on Tom and Sueâ€™s Flowersâ€™ bonds is 0.80 percent. The maturity risk premium is 0.75 percent on 5year securities and increases by 0.06 percent for each additional year to maturity. Calculate the liquidity risk premium on Tom and Sueâ€™s Flowers, lnc.â€™s, 10year bonds.Â (Round your answer to 2 decimal places.)




