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Today, interest rates on 1-year T-bonds yield 1.3%, interest rates on 2-year T-bonds yield 2.2%,...

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Finance

Today, interest rates on 1-year T-bonds yield 1.3%, interest rates on 2-year T-bonds yield 2.2%, and interest rates on 3-year T-bonds yield 3.8%. a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.

%

b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.

%

c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.

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