# Question

Following are the yields on selected Treasury securities:

Maturity Yield

5 years 3.1%

6 years 2.9

7years 2.6

Using the expectations theory, compute the expected one-year interest rates in (a) Year 6 and (b) Year 7. That is, compute the rate that is expected to exist during Year 6 only and the raw that is expected during Year 7 only.

Maturity Yield

5 years 3.1%

6 years 2.9

7years 2.6

Using the expectations theory, compute the expected one-year interest rates in (a) Year 6 and (b) Year 7. That is, compute the rate that is expected to exist during Year 6 only and the raw that is expected during Year 7 only.

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