Suppose that the current 1-year rate (1-year spot rate) andexpected 1-year T-bill rates over the following three years (i.e.,years 2, 3, and 4, respectively) are as follows: 1R1 = 2.54%,E(2r1) = 3.80%, E(3r1) = 4.30%, E(4r1) = 5.80% Using the unbiasedexpectations theory, calculate the current (longterm) rates for 1-,2-, 3-, and 4-year-maturity Treasury securities. Plot the resultingyield curve.
