Today, interest rates on 1-year T-bonds yield 1.3%, interest rates on 2-year T-bonds yield 2.4%, and interest rates on 3-year T-bonds yield 3.5%. 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.

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.

 

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. 

 

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a Yield on 1year Tbonds one year from now The pure expectations theory states that the yield on a lo... View the full answer