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Suppose we observe the three-year Treasury security rate(1R3) to be 11 percent, the expected one-yearrate next year E(2r1) to be 4 percent, andthe expected one-year rate the following yearE(3r1) to be 5 percent. If the unbiasedexpectations theory of the term structure of interest rates holds,what is the one-year Treasury security rate,1R1?
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