Unbiased expectation theory of the term structure


Problem:

A recent edition of The Wall Street Journal reported interest rates of 4.25 percent, 4.60 percent, 4.98 percent, and 5.25 percent for 3-, 4-, 5-, and 6-year Treasury security yields, respectively.

Required:

Question: According to the unbiased expectation theory of the term structure of interest rates, what are the expected 1-year forward rates for years 4, 5, and 6?

Note: Please show how you came up with the solution.

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Accounting Basics: Unbiased expectation theory of the term structure
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